October 26, 2023

Why establishing deeper direct customer connections increases ROI for e-commerce brands.

Deeper direct customer connections allow an e-commerce brand to understand its customers more intimately, leading to more effective strategies that enhance customer satisfaction and ultimately, drive higher ROI.‍

Establishing deeper direct customer connections can significantly enhance the ROI for an e-commerce brand in several ways.

  1. Enhanced Customer Loyalty: When customers feel understood and valued, they're more likely to stick around. Personalized experiences and meaningful interactions can foster loyalty, leading to repeat purchases, increased customer lifetime value, and higher ROI.
  2. Improved Conversion Rates: A deep understanding of your customers can help you tailor your marketing and sales strategies to their needs and preferences. This often results in higher conversion rates as your offers resonate more with your audience.
  3. Lower Customer Acquisition Costs: Satisfied customers often become brand advocates. Through word-of-mouth and referrals, they can help attract new customers to your business, reducing the costs associated with customer acquisition.
  4. Increased Average Order Value: By understanding your customers' preferences and buying behavior, you can recommend products that they're likely to be interested in, increasing the average order value.
  5. Better Decision Making: Deep customer connections provide valuable insights that you can use to make data-driven decisions. This can lead to more effective strategies and higher ROI.

A study from Harvard Business Review  set out to understand how valuable a retailer's fully connected customers were and how they could attract more of them. 

Research showed that although fully connected customers constituted just 22% of customers in the category, they accounted for 37% of revenue and they spent, on average, twice as much annually ($400) as highly satisfied customers. Customers in this segment, labeled as Flourishers:

  • have a high lifetime value, spending an average of $468 a year in the category, versus $235 for other customers.
  • shop more often and advocate more: Fully 46% of Flourishers shop key fashion categories at least monthly, versus 21% of all shoppers. Flourishers are 1.4 times as likely as other customers to recommend retailers to their friends and family members.
  • are less price-sensitive: They are 2.3 times as likely as other customers to say they are “willing to pay more for the best fashion products,” 1.7 times less likely to make fashion purchase decisions solely on the basis of price, and 1.3 times less likely to shop for the lowest prices.
  • are predominantly female and younger, more ethnically diverse, and more likely to live in urban centers than other customers.
  • are more digitally engaged than other segments: They are 2.3 times as likely to research a fashion retailer online, 2.9 times as likely to shop for fashion products through their mobile devices, and 3.7 times as likely to follow a retailer on social media.

In a nutshell, deeper direct customer connections allow an e-commerce brand to understand its customers more intimately, leading to more effective strategies that enhance customer satisfaction and ultimately, drive higher ROI.

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