The 80/20 Rule Drives e-tailing
The pareto principle is alive and well on the Internet. But naturally, like everything else associated with the Web, it’s on steroids. It’s a 90/20 rule, instead of a measly 80/20. Cyber Dialogue recently released a study reporting that the top 20 percent of online shoppers account for 87 percent of consumer online sales. This means that consumer businesses are earning the bulk of their e-commerce revenues — and, no doubt, the bulk of their profits — from a handful of customers. And, if that weren’t enough, a recent study from Jupiter Research suggests that multi-channel buyers, who shop online and offline, spend 30 percent more than buyers who stick to a single channel like retail stores, catalogs or the Internet. These are two separate studies, but it’s likely that these are the same top customers that Cyber Dialogue is talking about.
But wait, there’s more. PricewaterhouseCoopers recently published a report about shopping behavior that indicates a keen preference among consumers for retailers who offer information and buying opportunities through a number of channels — to the point that they are beginning to shun retailers who provide only a single sales channel option.
These shoppers tend to be influenced through one channel and buy through another, suggesting that they want access to retailers anytime, anywhere, at their convenience.
The timing of these three studies is no surprise, as the world prepares for the holiday rush. The data in the studies build to a clear conclusion: E-commerce merchants who are able to track their customers’ behavior are learning powerful new facts about who’s buying what, when and where. And most importantly, who the most valuable, profitable customers are, and why.
Connecting with customers
So what are retailers doing with these facts? They are taking steps to retain these customers and make them even more valuable. Interesting things are going on in retention-land, beginning, of course, with service excellence. Merchants know that the best way to stimulate repeat buying is to provide a great experience in the first place. So they are focusing on their Web sites — making sure the navigation is smooth and intuitive, and the shopping cart is the best available so visitors can find what they want, and buy quickly and conveniently.
But they are also reaching out proactively to maintain an ongoing relationship with customers. E-mail has proven to be a superb tool for this kind of outreach, especially opt-in newsletters that call attention to new merchandise, special deals or relevant information. If the newsletter content is of value, these messages can work wonders to keep buying opportunities top-of-mind.
One of the most exciting tools I’ve seen is automated e-mail marketing communications, sometimes known as “lights-out” marketing. Marketers set up decision rules in advance, in a yes-no, decision-tree manner to send the customer a personalized, relevant message at the appropriate point in the relationship. Just after an order, an acknowledgement note might be indicated. A week later, a follow-up customer-service message can ask whether the product was satisfactory. Automation tools are available through a number of the larger e-mail service providers and allow an ongoing communications stream that is unparalleled in the offline world.
Most important, merchants are recognizing the reality of the 90/20 rule: Those who don’t know their customers — who’s hot, who’s not — are doomed to treating everyone the same, leaving money on the table in the process.