Nothing is more important to the success of an ecommerce or any “mail order” operation than new customer acquisition. Both online and offline companies simply could not exist without a steady flow of new buyers and inquirers.
For instance, a recent study showed that for an online business to grow from $0 to $ 1.5 million in sales over a six-year period it needed a total of 100,000 new buyers. And for this same company to achieve $15 million in sales, it would take, over the same six years, 1,250,000 new buyers!
If you look at these numbers and consider the incredibly low conversion rates (an average of 1.5%) from well-targeted traffic sources, you will get a good idea of the enormity of your task.
Philosophy and Goals
I have begun most of my industry talks with a basic point of view that I hope to instill in you. It is simply this: “Your most important task as a performance marketer is to acquire the maximum number of buyers in the shortest amount of time and at the lowest possible price.” You will note that I said “price,” not profit.
In this day of rising costs and lower response rates, I firmly believe the absolute best you can expect to do is break even in your buyer acquisition programs. Today a handful of ecommerce companies can still make a profit on customer prospecting efforts, but they are either a dying breed or companies which, for one reason or another, are not interested in growth.
(There is also the third way: the nutra niche and similar affiliate-driven aggressive offers.)
An ecommerce company that wants to sustain a growth rate of 10%-20% per year must be prepared to sustain a loss (in the short term) to acquire new buyers and be prepared to spend 25% of gross revenues to maintain this growth.
Perhaps I have made this “new prospects and customers” effort sound overwhelming – or, perhaps, nearly impossible. Not so. My intention, rather, is simply to stress both the importance of a successful customer acquisition program and the extra efforts required to achieve this goal. The rewards of these efforts come quickly after the prospect has become your buyer.
Once the customer is in your buyer database, you should think of him or her as a “subsidy” that will, for his or her buying lifetime, help defray all the seemingly overwhelming costs of acquiring the other new buyers who must constantly be coming on-stream.
A buyer, once acquired and depending on the average order, will be worth somewhere between $200 and $300 over a three-year period if you are into average-priced products with average margins. With those figures in mind, it is obvious that he or she can support the expense involved in acquiring a number of new buyers.
Another particularly important caution for performance marketers is that you must always be conscious of the fact that you want quality, not quantity, in your acquisition programs. Many online and offline companies have gone broke by acquiring too many prospects and customers. In other words, the conversion quality was poor in relation to the cost of acquiring the name.
Three final and ominous points must be accepted by marketing and management in an ecommerce start-up situation:
- The response on outside traffic sources cannot be budgeted at more than 1.5%.
- At least one-half of your advertising expenses will not be recovered for two to three years. That is the time it will take you to figure out which traffic sources and what type of ads work the best. At that point, success will be measured by the fact that you may break even.
- Your new buyer database will not support your new acquisition program until it reaches at least 50,000 buyers.
Now that we have identified the difficulties of the task, it is time we looked for the solutions. Actually, the methods used for new buyer acquisition are quite simple and obvious.
It is the techniques that require experience and expertise. The following discussion covers nine major sources for prospects and customers, listed in order of their importance for the average B2C ecommerce operation, and a few tips to make these sources more profitable.
Rented Outside Mailing Lists
Known “Mail Order” Buyer Lists
This is not only the most common method to acquire new buyers, but it also is the fastest way. This method gives you “pre-qualified” buyers, rather than leads who then must be converted into buyers.
If you are a start-up company, the competitive lists you most want to rent most likely will not be available to you until you have approximately 25,000 buyers you can “exchange” with these competitors.
Of the outside lists remaining to you, it has been proven that known “mail order” buyers from other ecommerce, direct response TV, direct mail, direct response print ads and similar lists will be your best list rental investment.
Note: “mailing list” is a shorthand for a database you can contact by whichever means available and most profitable to you. These may be emails, direct mail pieces, telemarketing live agent calls, robocalls, SMS texts and possibly more.
Even then, you will probably have to lessen your available universe by selecting only those buyers who have bought within the past six months, and who spent more than $25, or through other special selects available.
These selections, nearly always necessary, greatly diminish the quantity of names available to you. Also, repeated usage of these names by others in your field has diminished response levels for everyone over the years.
Nevertheless, these lists are your best source of new buyers at the lowest cost.
If your business is in the US, there are a lot of database brokers that could help you out. If you are outside the US, you will have to do most of the work on your own and prepare for list exchanges as customer list rentals are not as popular outside the US.
The next major category of available and sometimes profitable rented lists is entertainment service and magazine subscription lists. They are more difficult lists to make work for ecommerce sites, as most of them are not merchandise buyers, per se.
However, certain publications or services that are specifically aimed at your market can work. For example: if you sell tools, you could make a home improvement streaming service or magazine subscription list work, but Time magazine’s online subscription list would not even come close, probably.
Compiled lists are emails of people with no known ordering activity. They are used by ecommerce marketers due to their low cost and huge volumes available. Most of the time these may be generated by online sweepstakes, quizzes and some other, not related to buying activity, tactics.
Thus, these lists should be considered only as a very minor source of new buyers for your acquisition program.
First-time customers generated through email promotions compared to online display advertising described below seem to be easier to convert again and again, especially if your on-going monetization efforts are concentrated on sending email promos.
Online Display Advertising
Unfortunately, many ecommerce businesses have not fully explored the use of online display ads, especially through Google Display Ads, Facebook ads, Taboola ads and more, for acquiring new buyers. Nearly all have dabbled in it but get discouraged when they see meager results.
Many “quit” when they first discover that it is more complicated than they originally thought and realize that it takes several years or longer to come up with the right ads in the right places.
Some have mastered this long and involved testing period and have greatly profited from their efforts.
Determining the Right Ads for Online Display
The most astute performance marketers in this arena are affiliate marketers specialized in selling dietary supplements and similar miracle products with over-the-top claims. They have learned, over many years, the answers to:
- What type of ad (lead generation or straight sell, long or short copy, sweepstakes or premiums, one product or multiple product promotion) should be used?
- Which banners ads produce the maximum response at the lowest cost?
- What audiences in which ad networks work best, and at what time of the year?
- What kind of products, and at what price points, work the best?
If I were starting an online display ad program, I would go through all available online ad spy tools, such as AdBeat, AdPlexity, and others, and creatively copy the format being used by those spending most ad dollars on performance-based promotions in your niche.
Remember, they have spent years developing advertising winners, so why should you re-invent the wheel?
Taboola Trends and Facebook Ad Library might be of some help as well, although they lack the most valuable information: which exact ads get most ad dollars.
To mount and achieve a successful display advertising program you are going to have to answer, for your own operation, all four of the questions listed above. As I said before, the best results you can expect are to break even, but display is a source of buyers – new mail order buyers that have probably not bought from your competition before.
Get going on a display ad program and stick with it until you have the answers to the questions above. And, after you have discovered your best formula for display ads, do not blow it by not handling these new inquirers correctly.
Converting Ecommerce Newsletter/Coupon Leads
Here are a few proven tips on how to convert your prospects who were promised a dollars-off coupon upon subscribing to your promotional newsletter:
- Send coupons and a “secret offer” (i.e., one not available publicly) the moment inquiries come in, and consider sending them via SMS text as well. (Test email-only vs. email + SMS text. It may turn out that, because of low conversion, you cannot afford to send SMS texts. However, SMS texts will often nearly double the response of email-only effort.)
- Put in the email topic and its body copy: “Here’s the coupon and the secret offer you requested.” This can lift response by 10%.
- Mail again to these inquirers every six to eight days (while they are still interested in you) or until they fall below break-even. Response rates for ecommerce leads vary widely. For example, if you email and text them the day inquiries come in, you should expect a 6%-10% response. Response falls off the longer it takes to get to them.
- Consider text-based follow-ups (“Did you miss the email I sent you?”) instead of image-based, colorful promotional emails.
Some companies, claim they get as high as 20% conversion to certain types of leads from their newsletter subscriptions on their first touch. On average, though, I would say that most ecommerce marketers get about 3%-6% conversion response from them. You will not match that pull from any outside traffic source, so you obviously should pursue a structured program that will bring these new inquirers in to your prospect database.
Search Advertising, SEO, eBay-like, Review, Coupon and Price Comparison Websites
While these seem to be the main sources for ecoms reselling widely available products, these media channels are not as popular with businesses selling their own products and services. Not rightly so.
If you are into high volume promotional efforts (e.g., you get 500 orders daily through such efforts), in whichever performance-based channels, people will use search to find out more about your product or service brands. And they will convert.
It is virtually guaranteed these search-based channels will add at least 10% to the daily number of your orders.
Package Insert Program
As with online display ad efforts, every ecommerce marketer should experiment with a package insert flyer in other mail order packages.
The most successful format I have seen for ecommerce sites is a digest-size, eight-page, color mini-catalog featuring their very best products. Some marketers have been successful putting a “free dollars-off coupon” promotion in other sellers’ packages.
The best response you can expect is about 0.5%. However, the costs are low (no postage, and printing is about a few cents), so at that percentage you are about breaking even. It is an inexpensive way to get at some of the mailing lists that do not work if you used, for instance, direct mail.
It is definitely a program with which all online and offline sellers should experiment, since it is inexpensive and, once you have found successful packages, it is a healthy, ongoing program that will produce a steady year-round supply of new buyers.
Customer Service Contacts
Your prospective customers most likely ask you questions via emails, contact forms, chats, phone, or regular mail. Whether your responses are automated or not, make sure you use these venues to identify if they are already in your active customers database. If they are not, then do all it takes to convert them to first-time buys, e.g., by means of “secret offers”, coupons, sweepstakes etc.
These will be some of your best prospects, as they have already shown interest in your store or items.
This may be an interesting source of new prospects. Although the conversion rate is a bit low (2%-4%) these prospects, again, are as good as, or better than, those from most outside traffic sources. And they are free (unless you consider alternative profit of some action that could be the alternative to this one, of course)!
This is a program that all performance marketers should pursue. Here are the most common ways to acquire these names:
- Put spaces for three friend emails in the post-final purchase step and editable short message offering a dollars-off coupon and a gift for both the referring party as well as the person receiving the message. (If you ask for more than three emails, the response drops dramatically.) Make sure you do not add these names to your prospect database as this would be considered illegal in many jurisdictions. Legally, the email message will be sent by your customer (i.e., not you) through your systems.
- Make it easy for your customers to share referring message on their social media sites. You will pick up a significant number who did not fill out the friend emails form.
- Consider locking a special offer. The mechanism (a script) would force the user to send a defined message via SMS or WhatsApp a defined number of times and only then unlock the offer. (These scripts are cheatable but work nevertheless). You will pick up additional contacts.
Since these people do not expect any promotion, the only sensible way to contact them is with your best offer, possibly text-based only, with a clear understanding who exactly is referring them, and why. You should find that these users will convert at about 1-2%.
These names often are overlooked by marketers because they are not “true” buyers or because they do not want to offend the “donor.” Both reasons are invalid. In all tests I have seen, these recipients, when contacted, pulled 3%-5% with no complaints from the donor.
Public Relations Programs
An annoyance? Perhaps, but the real pros in the ecommerce field have regular PR programs that bring them a regular, albeit erratic, number of new leads.
Most have a simple program that involves informing about new products to a list of niche sites and magazines, online or offline.
Obviously, places in which you advertise should be at the top of the list. And you should add a little pressure on them occasionally for a free press release. Remember, a news article about your new product or service is far more believable than your ad.
When I worked at Harvard Business Review Poland, we once received more than 3,000 lead requests stemming from a short message informing about a “special report” on a topic of interest to c-suite.
This is an easy program to administer, and your promotions should go out every time you launch a new product, service as well as high-quality leadgen pieces (e.g., special reports, research, whitepapers etc.)
Retail Store Names
If you have retail stores as part of your ecommerce operations, this is another source of potential buyers (have the customer fill out a card).
Generally speaking, these names are not particularly good for mail order, but they can be segmented by geography / ZIP codes. The further away from the store location, the better such names will work.
TV, Radio and Print Magazines
Depending on the countries you do business in, these media may or may not be very economical ways to attract good buyers or leads. Only the very large businesses have experimented with these media (as rate card rebates are only available for volume purchase), and they may be very profitable.
In some countries, for instance the US, the direct response TV industry is very much advanced in terms of specialized production studios, consulting services, media buying agencies, research tools (Dr Metrix, IMS Report and more).
European countries, on the other hand, have very limited DRTV presence. Some European TV stations do not provide DRTV time at all, some – instead of having lower rates for teleshopping – have higher ones, some auction all of the available time to the highest bidder at the beginning of each year.
And then there are European countries which have strict rules against anything related to showing a price or a phone number on screen but are fine with a call to action directing to a webpage. Some will let you have a leadgen offer and then there are those that will not accept your spot due to the actors being not handsome enough (that is no joke, but Italy.)
This makes scaling your winning campaigns to multiple markets difficult. But if you manage to make direct response TV work, as my clients did, you will get large volume of sales, not available online.
Similar limitations concern direct response radio ads. If you manage to put them on a national radio you may get inundated with orders on your very first broadcast.
Placing direct response ads in print magazines and newspapers is much easier – all over the world. If your target market is slightly older, for instance 65+, this might be your best bet.
Both single-offer long copy ads work as well as multi-offer short copy ones. And that is in 2021.
- Have a clear, step-by-step, month-by-month strategy for your customer acquisition goals. Do not stick to ad hoc campaigns generating new customers.
- Besides sending out email campaigns be sure to test all the other media channels available.
- Do not forget the offline channels – there is still a plenty of your prospects there.