E-Tailers Seek To Retain Customers Year-Round

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December 28, 2000 (9:40 AM EST)

E-Tailers Seek To Retain Customers Year-Round

By Ted Kemp and L. Scott Tillett,

Online retailers proved once again this holiday season that they know how to draw shoppers. But the true test of survival will be whether they can keep them.

Online holiday spending for the week ending Dec. 17 nearly doubled its 1999 levels, according to a study from Goldman Sachs/PC Data. From the first week in November through mid-December, online spending reached a new high of $8.7 billion. Over the same period in 1999, spending topped out at $4.2 billion.

But smart retailers aren't taking those numbers for granted. They are using incentive programs, bonuses such as free shipping, and customer follow-ups via catalogs and e-mail to make sure those holiday buyers become lifetime buyers.

"More of the pure play dot-coms that are going to survive are falling back on time-tested fundamentals of business," said David Strassel, partner at business publisher and research firm Intermarket Group. "And one of those is that it's much cheaper to keep a customer than to find a new one."

"Companies realize it's not just about building a relationship in December and waiting till next December to cultivate that relationship," said Joseph O'Leary, partner and U.S. leader for the Customer and channels Group at Arthur Andersen.

One such company is FTD.com. The online florist made a profit for the first time in its history in the first quarter of fiscal 2001, which ended September.

"Here's what I know about retention: The best way to retain customers is to treat them right the first time," said FTD.com president and CEO Michael Soenen.

Of course other steps help as well. FTD has found that offering e-mail-based calendar and reminder services not only holds customers, but increases buying frequency. When holiday customers at FTD.com were asked if they'd like to be reminded of events such as anniversaries and friends' birthdays through the year, 60 percent of buyers took FTD.com up on the offer, Soenen said. Those e-mails -- which are almost cost-free to send -- include targeted gift and floral offers.

For Devi Mohanty, president of online Indian goods retailer Namaste.com, the holiday shopping season was over in October. That's when Indian nationals around the world celebrated Diwali, a festival that is the peak of gift buying in the Indian culture. Now, Namaste.com is leveraging the customer contacts from its October peak into efforts to get customers to shop on the site throughout the year.

Like FTD.com, Namaste uses e-mail to get customers back into the virtual store. Namaste officials peruse their customer e-mails and flag .edu addresses, which often indicate students. The students might be involved in Indian student associations or other groups interested in buying Indian specialty items, Mohanty said. Namaste marketers send e-mail to the .edu to find campus "ambassadors" for the company -- in some cases asking for opportunities to come to campus and present information about Namaste in person at student association meetings.

Namaste also is undertaking a direct-mail campaign to remind shoppers of the site. Mohanty said Namaste officials will also search through online sales records to find out which shoppers have not returned to buy from the site within recent months and will call some of the shoppers at random to find out why they have not been back.

Namaste, with the help of e-marketing service IQ.com, also sent visitors a Web survey that was tied to a sweepstakes program. The idea was to get shoppers to give Namaste feedback on what kinds of products or services they would like to see added to the site.

And then there are the usual e-tactics for retention: an e-mail marketing program using software from Responsys, and efforts to segment customers using Blue Martini's e-business platform and analytics software from WebTrends. After segmenting data on customers, Namaste marketers develop special offers tailored to each segment.

Gratitude toward consumers can go a long way too, said O'Leary. "First of all, it's important to say thank you," he said, adding that many e-tailers forget to thank shoppers outright after a holiday purchase and to use thank-you e-mail messages as an entre to customer feedback.

O'Leary said it is important for merchants to offer related products after a visitor has bought an item from their online store, but he added that those offers must be made at the right time. For example, an online business that sells a computer to a holiday shopper might immediately offer that shopper computer training services. But many buyers of computers don't realize they need training until a few weeks or months after they have bought a computer, O'Leary said.

And in sending customers follow-up offers throughout the year, online retailers should make sure they make offers that fit a shopper's stated likes and preferences -- not necessarily items he might have bought as gifts for others, and not just a listing of all new items.

Another idea: Online businesses can give gift recipients slips of paper with an online code tied to a special offer on a product. The gift recipient can then go to the website, type in the code, and order the product fairly swiftly. The process becomes even swifter and more appealing if the code is tied to the gift recipient's shipping address and the online order form automatically fills in the shipping information for the new buyer, O'Leary said.

But not all retailers are using all the holiday-time retention techniques at their disposal. At least one e-tailer in December admitted that it had focused more on getting its website to handle the holiday traffic than on retention plans.

"First and foremost, we hope, we think, we're providing quality service to them," Mark Friedman, chief marketing officer at clothing retailer Brooks Brothers. "We think that's going to go a long way to having folks come back and visit us in January, February, March."

The site includes no Flash animation or "bells and whistles" that might slow its download time onto computers, he said. Brooks Brothers has been using InterWorld's e-commerce engine to run its site and upgraded to version 3.1 of the product in October, he said.

Friedman said he would like to have surveyed holiday visitors on their online shopping likes and dislikes. But that didn't happen. "I'd like to say that we had the foresight to do some of that stuff," he said. "But we were in the midst of an upgrade."

And, Friedman said, Brooks Brothers is not focused strictly on getting customers to come back to the site: It also wants them to visit one of Brooks Brothers' 152 physical stores. In December alone, the company e-mailed 110,000 customers a merchandise offer that would be valid only in physical stores, Friedman said.

Brooks Brothers, however, didn't miss the opportunity over the holidays to collect e-mail addresses, said Friedman. He said that when customers phone in with orders or questions, even if those customers have not shopped online, agents asked them for their e-mail addresses. "It's basic blocking and tackling," Friedman said.

Still, experts say most merchants have yet to put adequate effort into customer retention. Intermarket Group found in December that Internet retailers spend only 18 percent of their marketing budgets on customer retention, with the balance going toward customer acquisition and branding.

So far, O'Leary said, no one seems to be executing all the right techniques to leverage holiday traffic into sales later on. "It would be hard for me to identify, quite candidly, anyone who's doing it. There are very few e-tailers right now who really put the whole package together," he said.