The longer I deal with e-commerce, the stronger I believe that the way to success in this more and more difficult branch is loyalty.

How can we know it? All we need to do is to compare the effectiveness of e-mailing to external base, which comes from 0,01% to 1,5%, to the effectiveness of e-mailing current clients, which amounts to 5-6% (Doubleclick, 2009).

The effectiveness of inside e-maling has been in fact always very high. Among the advertising tools tested by Doubleclick, higher CTR was noted only in the search engines (5-15%). The next most effective advertising forms were video banners (however, only 0,5-2,65%).

Looking at CTR we are only halfway through (because there is also conversion in the target store), but still CTR decreasing with every year appears to picture the general tendency. The process of gaining a new client seems to be more and more costly. We can buy the media cheaper and cheaper, but their effectiveness is diminishing. It is experienced especially by those who were earning through partner programs several years ago and today, also in this model, earn nothing or less.

In the handbook E-Commerce 2010. Business. Technology. Society (K.C.Laudon, C.G.Traver, Pearson, 2010), the authors give the costs of getting a new client with respect to the channels that have been used:

  • SEM – $8,5
  • E-mail – $10
  • Television – $11
  • Banners – $25
  • Press advertisements – $25
  • Direct Mail – $50

Currently, the cost of gaining a new client is estimated from 3 to 15 times higher than the cost of encouraging an already existing client to shop again (Electronic Commerce 8E, G.P.Schneider, Course Technology, 2009).

In the study E-Loyalty: Your Secret Weapon on the Web, Frederick F. Reichheld and Phil Schefter estimated that online stores lose from $20 to $80 on each new client in the first year because of the very high cost of such gain. Only building clients‘ loyalty will let one earn next year. What this study proves is that crucial for surviving in e-commerce is not necessarily getting new clients, but building their loyalty.

It seems that onlie businesses which build their sales only based on gaining new clients may be deemed to failure. Attracting new clients will get more and more expensive, and without caring for their loyalty, each new user will genereate sales but also losses.

It creates another difficulty for the marketers. An evaluation of the marketing actions should be postponed in order to measure the number of clients returning, gained by means of a given campaign. Only these data will show the true effectiveness of marketing. Prolonging the time between action and its estimation makes data analysis and decision making difficult, unfortunately. Such an advanced assessment of the effectiveness diminishes the dynamics of sales increase. Nevertheless, it also minimizes the risk of empty sales with zero profit.

Tomasz Karwatka

Supervisory Board Member at Divante. Leading industry voice who believes eCommerce can improve our world. Co-founder of Vue Storefront and Open Loyalty, angel investor, and founder of Tech To The Rescue. CEO at Divante eCommerce Technology Company | LinkedIn | Twitter

Share your comment