|Revenue Mainly From Existing Customers - Reorders?|
I was just wondering, can an ecommerce website survive mainly based on revenues coming from existing customer reorders?
I was just playing with some numbers and let's say for example I have 50,000 customers. If I just concentrate on taking care of my existing customers, and let's say only 2% reorder each month; that would be around 1,000 orders a month.
And let's say the average ticket price is $35.00; that would be $35,000 in revenue a month...not bad! Now I need to put this theory into action! haha...
It sounds to be easy money, but keep in mind that they do not stay forever. If you enroll your customers in a monthly plan to replenishment their stock, then it might work. But you also have to work on customer aquisition to replenish your own pool of active customers. I read somewhere that in continuity/membership programs the average customer leaves after 3 or 4 month. Don't know how this is for physical goods.
Might be a good idea to offer a discounted price or something special (e.g. free delivery) to those customers that enroll for a monthly plan or who pre-pay for a longer period.
Any existing customer base will decline, this isn't an ecommerce issue, I have seen it at first hand in other areas. The rate of attrition will determine how you divide your effort between encouraging repeat sales and attracting new customers.
The mistake is to concentrate 100% on the existing customers until you suddenly realise that that drop in sales wasn't a glitch but a major trend. As I have said I have seen this elsewhere, it happens and it is difficult to recover.
There are 3 things we do for our own sites that keep existing customers around.
1. Offer a membership club that they pay for monthly, usually around $5 or $10, and they will ALWAYS save at least that amount on a purchase. It's a no-brainer for most people - you come to the site and the price is $59, but if you're a club member the price is $45. Some people will join the club to get the discount then cancel after the first billing, which is fine, we already planned on letting the item go for $45 anyway :) For those who stay on, we've accomplished two goals: created a residual revenue, and given customers a reason to keep coming back.
2. For a site that sells perishable or consumption items (in our case Vitamins), we include an an autoship option where we'll automatically create a new order and ship them the items every month (or whatever the lifetime is of the product they ordered) so they don't have to keep coming back.
3. I'm hot on the whole gift card thing now after seeing what kind of results it did for one of our customers. Every once in a while we throw in a free $5 gift card to a regular order. NOT a coupon, an actual plastic gift card. Gift cards feel like real money in their hand, and they come back and spend it.
We sell a consumable with a good base of repeat customers, but still depend on growth to make up for the ones we lose. It's bound to happen. And sometimes I'm surprised by a customer that hasn't ordered in ages and comes back to purchase from us again. I like the idea of the gift card included with an order, digitalv. We're in the process of moving our site to a new cart provider and I may try out the membership and auto-ship methods once the dust settles.
By refereeing to gift card do you mean Store gift card or a Visa/Mastercard branded one
It's a store gift card, there is a site called Card9 we've been using that makes them. You create an image for the front of the card and tell their system how many cards you want and what the face value of the card is and they create the plastic cards with your front artwork and send them out. Their system keeps track of the balances for you and you just integrate it like another payment gateway. It takes a little bit of work to integrate the gateway into your cart, I only know of one shopping cart that has it built-in already, but if you know XML and have worked with the Authorize.Net gateway theirs is similar. It's $1.25 a card, so its more expensive than paper certs but it's also kind of a constant advertisement. People put it in their wallet and even if they don't use it, they're reminded of your store every time they open it. It's kind of a neat gimmick.
That's a great idea, digital. I just visited their website and see that they can also create virtual cards that can be emailed. Definitely going to look into both types for my customers. Thanks!