Of all the articles, or ‘threads’ of articles I’ve written, none have solicited as much response as this one on incentives.
Why are so many new incentive programs being designed for ecommerce sites? Because online retailers continue to struggle with the issue of customer retention.
For most online business models, new customer acquisition costs are very high. Online, you can’t afford to attract a customer just once and you never get a return visit.
Based on the email I’ve been receiving this week, here’s what seems to be the prevailing wisdom:
- Acquire your first time customer.
- Retain that customer by rewarding repeat visits and purchases with ‘points.’
On the face of it, this looks like a reasonable model. But in spite of the great arguments that have come my way recently, I still think that ‘points’ alone offer a very fragile solution to customer loyalty.
I believe that incentives and points are great ways to attract attention. But I don’t think they have what it takes to create and maintain customer loyalty.
Here’s the model I’d rather pursue:
- Make first contact in creating a new relationship.
- Nurture that relationship with spontaneous ‘points of contact.’
Let me explain these two steps.
First, you’ll need to make first contact one way or another. This is the point at which I’d be more likely to offer an incentive or reward.
“Visit our site now for the chance to win a new VW Bug.”
“Make your first purchase before June 1 and get this Swiss Army Watch free.”
I’ll use an incentive at this point because when you want to start a conversation with a stranger — you need some kind of ‘pickup line.’ And in the busy world online, that line had better come with a reward of some kind attached.
You need the equivalent of, “Can I buy you a drink?”
Then, once I’ve made first contact, I need a way to develop a lasting relationship.
How shall I do that? (Assuming that I have the fundamentals in place: A great site, great products and great customer service.)
I think I’ll need to do better than:
“Can I buy you another drink?”
“Come back often and I’ll buy you even more drinks.”
That sounds like a pretty flimsy basis for growing a relationship. You’d be better off following up with the offer of dinner, a walk in the park, an invitation to meet the family, a rose.
Relationships grow through a progression of rising levels of trust and intimacy.
How can you achieve that by pursuing a linear route of just offering more of the same ‘points’?
I’d be likely to use points in order to attract attention — but to try something a little more interesting to help grow the relationship.
Imagine I have a gift store online. At first sight, I might entice you in with a free gift. To grow our relationship I might think of some other ways in which I could retain your interest and loyalty.
Next time I ‘see’ you at the site, perhaps I can offer you free gift-wrapping or shipping. If you become a regular, I might invite you to a ‘private showing’ of new gifts at a password-protected area.
Once you reach a certain level of spending I may send you an unexpected gift — some flowers, a bottle of wine.
I may do something as simple as send you a thank-you email at an unexpected moment.
Is this kind of approach scalable for a large commercial site? I think so. At least, with a little effort.
With the time and money you’d put into a linear, points-based, ‘not-really-a-relationship-at-all’ — why not try for the real thing?
Makes sense to me.
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