Customer Loyalty in E-Commerce

May 4, 2016
Loyalty in E-Commerce

If you consider the progression of e-commerce sales figures, it would appear that business is very good. Nevertheless the climate for individual online retailers is becoming increasingly harsh. More and more businesses are betting on lucrative online business. Together with the increasing internationalization of e-commerce, this is leading to a real offerings inundation in the market. Today customers already suffer the agony of choice. Prior to any planned purchase they can compare vendors, offerings and products online within a short amount of time and then choose freely amongst them. The “net safety” online purchase inhibition has also diminished due to the number of merchants with official safety certificates. Customer loyalty is progressively declining because of the numerous purchase opportunities: people are buying where it’s cheapest or where the shopping experience is the best.

Success Factor Customer Retention

In order not to resort to price dumping and still win over the customer, many online shops increasingly rely on CRM (Customer Relation Management) strategies. The focus here is on considering what prompts customers to remain loyal to shops used once.
The goal of getting customers to become loyal and to retain them is not easy to implement, but it’s worth the effort. A loyal customer is worth his weight in gold.
  • Actions to achieve customer loyalty are many times cheaper than those aimed at new customer acquisition.
  • In addition they make you to some extent independent of Google and their self-determined ranking factors.
  • Existing satisfied customers also bring more revenue in the long run, because they spend more money. First time buyers on the other hand are often just bargain hunters who always buy where it’s cheapest.
  • And not to be underestimated is the fact that current satisfied customers provide no-charge advertising through word of mouth and recommendations they express to friends and acquaintances, or even pass on through social media.
Engaging in customer retention is therefore one of the key success factors in online retail.

How a New Customer Becomes a Loyal Regular Customer

The prerequisite for a new customer becoming a loyal return customer is his satisfaction. But trust and affinity for a shop or a retailer also play a large role for customers and their loyalty. If an online retailer is also successful in helping the customer develop a feeling of attachment to his shop, then he’s in the home stretch: to get the customer interested in himself and his offered products, and to retain that enthusiasm for as long as possible.

For the online retailer running this final stretch of the stated customer retention goals means the customer is the uncompromising focus of his actions. All activities to accomplish the following list of sub goals should therefore be based on sufficient information about the target audience. Only with the help of detailed customer information can these goals be individually addressed, and then indicate a tailored offering that puts you in the right place at the right time.

Sub Goal 1: Guaranteeing Customer Satisfaction

To ensure that the customer is satisfied, it is necessary to pay attention to and optimize several factors. The three most important of these are:

– The Order Process
The customer must be happy with the entire order process. This starts as soon as the search for and choice of the desired products, and continues through placing the order, payment, delivery, return service, post-purchase activities and customer service. To achieve this goal the following areas should be appropriately streamlined:

  • The Online Shop: The shop design should be modern and inviting as well as professional, which inspires trust. The product taxonomy, search functions and navigation should all be clear and intuitive, and lead quickly to the desired items. The products must be professionally depicted, and the product information presented in such a way that the customer has no unanswered questions about the item. The ordering process should be simple and able to be completed with just a few steps. The customer should also be offered as many diverse payment and delivery options as possible. Access to the customer’s account and the calling up of targeted information there must proceed intuitively, and include all required information.
  • Delivery: Shipping charges should be minimally calculated and quoted. Starting at a certain amount shipping should be free. The delivery time should be as short as possible, clearly defined and reliable. A short message to the customer if delivery is delayed is a must. But a quick email when the merchandise ships is also a good service to the customer.
  • Customer Service and Returns: The accessibility of the customer service department should be communicated as conspicuously as possible. The longest possible service times, and toll-free telephone numbers are also a plus in the eyes of the customer. In addition online information about the most commonly asked questions (FAQ) should be provided. If an order becomes a return, the process should be as comfortable as possible, and ideally free of charge.
– The Products
An additional prerequisite for customer satisfaction is that the purchased product fulfills the customer expectations or better yet, exceeds them.

– The Offerings
The product range should be displayed to the customers in a target group specific manner. Nothing is more annoying to the customer and creates more disinterest than offerings that don’t meet their needs at all. Successful customer retention assumes that the requirements of the target group are analyzed, and that the appropriate product range is then assembled and made available. Online newsletters, post mailings, brochures included in parcels, and the website itself can be used as communication methods for target group specific offerings.

Sub Goal 2: Acquisition of Customer Trust and Affinity

A common reason for the end of loyalty are negative feelings, for example mistrust regarding payment security, delivery, return shipments, and data privacy. Also poor business conduct towards suppliers, partners, personnel and customers leads to a decrease in trust and especially support for the shop. Particularly at the beginning of a new relationship, customers are very cautious and wary of new shops. Even with small mistakes retailers run the risk of losing the customer again.
To build trust, online stores should get certified by one of the established providers of shop certifications like Trusted-Shops, EHI or TÜV Süd and communicate this distinctly.
Publishing customer feedback, as well as good after sale complaint and customer service management also contribute to confidence building. Shop operators who have a focus on “fair trade” should make this evident. Donation campaigns or other implemented corporate social responsibility projects build customer confidence and create affinity as well.

Sub Goal 3: Creation of Customer Attachment to the Shop

If as a shop operator you have managed to help customers feel connected to your store, then you have finally made it and won a regular customer. However this feeling of attachment can’t develop after just an initial purchase. So for the retailer this means reminding customers about yourself again and again with suitable offerings. Based on experiences in e-commerce retail, after a second positive purchase experience, customers remember a respective shop quicker and more often as a potential purchase source then the third time. Once again drawing attention to yourself and creating an attachment to the shop for the customer can take place in accordance with appropriate actions. An operator can remind customers about his shop through personal appeals and tailored offers, and can enhance this with special promotions for regular customers. When doing this a lot of attention should be bestowed on the customer, and he should be rewarded for his loyalty. The following are some possible activities in this vein:
  • Exclusive offers
  • Exclusive discounts
  • Exclusive services like a personal customer service agent and a separate hotline
  • Regular customer guarantees
  • Invitations to events
  • Customer recruiting customer activities
  • Memberships in a customer club, or VIP membership
  • Bonus systems and prizes
  • Small gifts included in shipped packages

Looking at a range of online shops, including many larger shops, one realizes that nearly none of the shops are perfectly designed and capable of retaining customers on a long-term basis. There is therefore plenty of room for improvement – potential that small and medium-sized online shops can tap into. Increased focus on customer retention offers these businesses real opportunities to take hold and prosper on the market on a long-term basis despite the strong e-commerce competition they are up against.


Ines Maione