Fast Facts: Tweaking ecommerce spend for retention

A case to shift mobile spending away from acquisition-only.
Man using mobile payments online shopping and icon customer network

Brands continue to invest in their ecommerce offerings, following the path-to-purchase blazed by mobile-enabled consumers. But mobile shopping solution provider Shopgate believes many marketing budgets don’t set aside enough investment for customer retention even though its research shows it’s a better way to invest.

Shopgate has released a whitepaper sourcing several recent reports from Adobe, remarketing firm Criteo and inbound marketing platform Hubspot on how to drive ecommerce sales.

The company says that repeat customers make up only 8% of ecommerce site traffic, but account for 40% of sales. Yet marketing budgets continue to value new customer acquisition over building loyalty.

“For every 100 visitors to an online store, just two actually make a purchase on average,” the company says in its report. “Still, about 78% of the retail industry’s digital marketing budget is spent on acquiring exactly this kind of traffic. It’s a classic scenario of merchants favoring quantity over quality – a scenario that’s costing retailers a massive amount of money for a minimal return.”

Citing research in Invesp’s “Customer Acquisition Retention” report, an increased customer retention rate of 5% can increase profits by 25% to 95%.

“Budgets are typically allocated according to the number of visitors attained with each dollar,” Shopgate says, “but this method does not properly correspond to the division of actual sales being completed. On the contrary, the high discounts and low-margin offers provided to first-time buyers can actually hurt the relationships you have with existing customers, while capturing one-time visitors for only a moment, leaving loyal users in the lurch.”