E-customer acquisition costs growing alongside profits

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By: Wise Marketer Staff |

Posted on August 13, 2007

E-customer acquisition costs growing alongside profits

Online retailers' profits are still increasing, but cost of acquiring customers is keeping pace and putting increasing pressure on margins, according to e-commerce conference firm E-Commerce Expo.

The company warns that, in the digital marketer's portfolio of e-marketing tools and interactive campaigns, very few companies are paying proper attention to what happens after the customer arrives on their web site.

Watch for failures, not just success "Poor browsing, searching, and navigational experiences, combined with failed transactions and abandoned shopping carts, are still going unnoticed by e-commerce managers," said Justin Opie, event director for E-Commerce Expo.

At the moment, Opie says, much of the e-commerce industry is still focused on customer acquisition rather than customer retention and building incremental sales, even though these strategies are clearly understood in most companies' bricks-and-mortar operations.

Loyalty focus comes next The problem of increasing customer acquisition costs will go some way toward changing the focus to customer loyalty and retention, as this strategy represents the only way to reclaim the costs of acquisition over time.

But every aspect of the e-commerce operation needs to place at least as much emphasis on customer conversion, customer retention, and smooth order fulfilment as it does on acquisition if e-retailers are to continue to grow their profits.

"From smooth, intuitive transactions to excellent fulfilment and after-sales service, companies must transform the quality of the whole sales process if they are to maximise the value of those expensively acquired online customers," concluded Opie.

Increasing online competition Over the past three years almost every retailer has woken up to the need for an online presence, and competition in developed markets is fierce as increasingly sophisticated techniques are employed to drive traffic to e-commerce web sites. But the winners, Opie predicts, will be those marketers who recognise that customer acquisition is only one component of a complete process that encompasses conversion, retention and fulfilment.

With customers abandoning up to 80% of shopping baskets on some web sites, e-retailers are clearly losing a great deal of money by paying in advance for customer acquisitions that fail to convert into a first purchase, let alone repeat business. But E-Commerce Expo's research found that many multi-channel companies do not have any real understanding of the effectiveness of their online offerings, with too many customers experiencing broken links, unintuitive navigation systems, and poor after-sales service.

Online isn't a free channel With the online experience having a tangible affect on the overall value of a brand, the long term business cost of inefficient e-commerce operations is significant. The perception that online sales are a nearly-free additional channel is no longer the case, as intensive competition and the ease of switching suppliers - a mere click or two - means that online customers need to be handled more carefully than ever before.

According to Opie, "It is time that corporate strategies reflected this, and time for companies to create a far more integrated online channel that truly meets customer demands."

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