When old tactics aren’t working anymore, it’s logical to start looking for new eCommerce strategies to grow your online store and do something different from other eCommerce stores.
While it’s hard to quit old habits, you can’t expect different results from doing the same thing repeatedly. If you need new strategies to grow, you need to change your thinking about success.
You might start by re-defining how you want to generate eCommerce growth and what new strategies you should apply to achieve these ambitious goals.
What is the correct eCommerce growth formula?
The most common eCommerce growth formula used by marketers and managers is:
Is this formula accurate? Is it complete? Our experience with thousands of online stores shows us that the formula above is broken.
While the common growth formula captures the number of visitors, the ratio between visitors and the visitors that become customers, and the average order value, it doesn’t take into account the Customer Lifetime Value.
Why is it so important to think in the long term?
Acquiring new customers is only profitable if those new customers become repeat customers. Otherwise, you’re just spending money bringing in new people who never turn back.
What is the sustainable approach for your eCommerce growth?
Strategic Marketing Expert Jay Abraham shows that there are only three ways to grow a business:
- Increase the number of clients
- Increase the average transaction
- Get existing customers to buy more often
Of these three alternatives, only the last one can help you move the needle on the long-term growth.
If you’re aiming for sustainable growth, the correct eCommerce growth formula is:
The number of Customers x Customer Lifetime Value / Customer Acquisition Cost = eCommerce Growth.
Why do you think big eCommerce players like Amazon are so successful?
They make sure they deliver what they promised and create a memorable experience from the first purchase. Then, they make sure they win their newly acquired customers’ trust and generate the second, third purchase, and so on.
After all, a happy customer is a customer that will keep on purchasing but will also bring new business, talking about his positive experiences with his friends, family, acquaintances.
In conclusion, if you’re building your long-term growth strategy, you must pay attention to traffic, and conversion rate, but also to margin and customer lifetime value.
As you already know from analyzing customer acquisition costs, bringing new customers is becoming more and more expensive than retaining existing customers.
This new perspective makes companies rethink their eCommerce business model and growth strategy to prosper in the experience economy.
> Download the eCommerce Growth Calculator to identify the KPIs you should focus on to level up your game.
Top Strategies to Grow Your eCommerce Business
The best strategies to grow your eCommerce store are based on customer data and customer-centric tactics.
You don’t want to do what everyone else is doing in eCommerce. You don’t want to sacrifice acquisition budgets for retention campaigns, and you shouldn’t.
What you need is a balance between your tactics, and it all starts with understanding your target audience and building your marketing strategy around what attracts high potential customers and keeps high-value customers close in the long term.
Focus on the right KPIs
No wonder people managing eCommerce businesses lose focus when it comes to tracking performance indicators. You’ve got all of these tools with tens of KPIs you can track, but only some of them are important for your sustainable growth.
Customer Lifetime Value (CLV) is one of them. When you understand that smart acquisition and customer loyalty are your keys to long-term growth, CLV becomes one of your north star metrics.
Besides CLV, you also want to keep an eye on Customer Acquisition Costs. This metric helps you calculate the actual cost of acquiring a new customer and compare it with the value a customer brings throughout their relationship with your brand. Calculating CLV to CAC ratio helps you determine how much you can spend on your customer acquisition campaigns.
Net Promoter Score (NPS) is a metric that helps you evaluate how happy your customers are and predict the future of your relationship. Calculate NPS and CLV across all customer segments and look at how happy, loyal customers are and how likely they are to stick to your brand and recommend it to others.
Customer Retention Rate (CRR) is important for growing an eCommerce business sustainably. As you know, the most profitable online stores are the ones with high retention rates, and retaining an existing customer costs 5 to 25 times less than acquiring a new one.
Net Profit Margin is one of the most accurate and actionable KPIs for your company. It might be hard to calculate and monitor the net profit margin, but you’ll know exactly what’s left after subtracting all costs from your revenue. You don’t just want to boost sales, you want profitable online sales.
Use the RFM model to segment your customers
Using the right customer segmentation model is fundamental when designing strategies to grow your eCommerce business. The RFM model helps you identify your most important customers and group the customer base according to their recency, frequency, and monetary value scores.
Based on their RFM score, you’ll be able to differentiate between active, at-risk, and lost customers. Having those segments defined helps you target specific customers and fine-tune various marketing efforts, from onboarding to re-engagement and win-back campaigns.
You have all this historical transactional data you can use to apply the RFM model and apply, once and for all, a segmentation method that your entire company shares and understands. You’re going to speak the same language and provide excellent customer experiences.
> Are you tired of guessing who your best customers are? Read our RFM segmentation guide.
Define your Ideal Customer Profile based on your existing top customers
From all customer segments you identify through RFM segmentation, only one includes your ideal customers. We call them the “Soulmates” – the customers with the highest RFM score. These customers will help you define the Ideal Customer Profile.
Analyzing their needs, motivation, and behavior helps you identify what makes them stay loyal to your brand in the long term and what processes you have to tweak so you can get them to stick with you longer and get more new customers like them.
The Jobs To Be Done (JTBD) framework is extremely helpful for capturing first-hand information from your most valuable customers. During the JTBD interviews, you’re going to capture the direct input of top customers, identify their struggling moments and understand the process behind their purchase decision.
> Growing your eCommerce business starts with the ICP and JTBD. Are you new to the JTBD framework? Learn how to prepare for the JTBD interviews.
Design a better customer journey using qualitative research
As you start performing qualitative research for your existing customers, you understand the motivations behind every customer segment type. Your qualitative research includes observing buying habits patterns or individual customer behavior, analyzing direct customer feedback, or performing cohort analysis to identify the campaigns that help retain customers over time.
Are you looking at high-value customers? Find ways to maintain their interest and satisfaction high.
Did you attract many new customers with your latest campaign? Give them the best onboarding experience to surprise and delight them so they will keep coming back for more.
Do you see a lot of customers that haven’t purchased for a while? Use reactivation campaigns and remind them why they love to buy from you in the first place.
Based on all the qualitative data you gather, you can now design a better customer journey for different segments. Your goal is to keep the loyal high potential customers close in the long term and design this perfect journey that keeps them engaged, loyal and happy.
Optimize onboarding using cohort A/B testing
Cohort analysis helps you identify how sticky your newly acquired customers are. In other words, you determine if they come back in the months after their first purchase. Analyzing the 2nd-month cohort stickiness rate helps identify the best approach to transform first-time buyers into repeat customers.
The onboarding campaigns have the power to generate positive emotions in first-time customers and eliminate remorse. In this phase, you have to give them clarity about their order, but also set the ground for future relationships, making them feel part of a community.
With cohort A/B testing, you can identify the most customer-centric approach for each customer type based on their RFM scores. You could have different email flows and remarketing ads. The happier they are with the first experience, the higher the chances to place a second order within the average days between transactions.
Optimize the customer loyalty program
Optimizing the customer loyalty programs helps you improve customer lifetime value and maintain high satisfaction levels. The way you mix the elements of a loyalty program (rewards, perks, gamification, exclusive benefits, tiers) depends on the particularities of your customers, as revealed during qualitative research.
Encouraging repeat purchases is directly linked to your understanding of customer behavior. Excellent customer loyalty programs generate increasing sales among top customers. Use them wisely to give your customers solid reasons to stick with your brand and ignore all those aggressive and tempting discount campaigns they’re seeing from your competitors.
Your top customers deserve and expect VIP treatment. They’re looking for more than awesome products and seamless services. They want memorable experiences, and you need to keep reminding them about the positive effect your brand has on their lives. Happy customers positively impact brand awareness, as they share how likable you are with people they know.
Monitor customer satisfaction using the Net Promoter Score system
The best way to measure NPS for an accurate image of customer satisfaction and experience is to send NPS surveys right after the customers place their orders and after they receive their orders.
The pre-delivery NPS helps you improve UX and increase conversions, while the post-delivery NPS generates valuable insights for improving customer experience, product assortment, and customer support.
Besides comparing pre-delivery NPS and post-delivery NPS, you can analyze NPS from various angles to identify where you should concentrate your optimization efforts:
- NPS by RFM segment
- NPS by Location
- NPS by Brand
- NPS by Category
- NPS by Channel
Happy customers are your promotes, the people behind those positive reviews on social media or your website. They raise your brand awareness. A high Net Promoter Score indicates that your brand has a lot of customers that are happy with the experiences you offered them and are willing to recommend you to their friends and family.
> Discover the principles you must know before monitoring NPS to avoid misleading NPS analysis and make better decisions.
Supercharge your website and email marketing with personalized experiences
You have all this first-party data you can push to your email marketing tool and set your brand apart. Personalization is one of the most crucial elements of your loyalty programs and increases the success rate of your sales and marketing campaigns.
Use all you know about your customers to create that human interaction so hard to find in most online experiences. Adapting your voice to various target audiences is essential for your strategies to grow eCommerce sales, and your content marketer knows it.
Personalize the customer experience by creating relevant suggestions on the website based on historical purchase data. Use email segmentation to create nurturing flows and messaging that suit consumer behavior.
> Are you aiming for increased conversions via email? See how you can use email segmentation to build effective email flows for each RFM segment.
Apply the product assortment optimization framework
The bestselling products might not be your best-performing products in terms of loyalty and retention rates. Some products look good in terms of sales volume, but when you look at churn rates and customer satisfaction levels, you realize they are toxic products, making your new and existing customers drift away from your brand and spread bad word-of-mouth about your offer on social media and offline, chatting with friends and family.
The product assortment optimization framework helps you differentiate sticky products from toxic products, allowing you to increase eCommerce sales sustainably.
If you want to optimize product assortment, you need to analyze your online business’s offer from four points of view: sales volumes, customer experience, customer behavior, and customer intent.
> Learn more about analyzing aggregated product data and start optimizing your product assortment.
If you want to build effective new strategies for eCommerce growth, you must understand each tactic we’ve presented in this article.
Our advice is to read the recommended articles at the end of each section. Or, if you are more of a visual learner, join our CVO Course, where nine international instructors guide you through the tactics behind the strong and successful online retailers everyone is talking about.
Frequently asked questions about growing an eCommerce business
How do I increase eCommerce sales?
Understanding your target audience’s needs and motivations will help you build more compelling messages and offers that can help you increase eCommerce sales sustainably. Your focus should be on growing online sales sustainably, with excellent customer experience around qualitative products and services.
How can I make my online store grow faster?
If you want to grow your online store faster but sustainably, you can leverage the power of your loyal, high-value customers by creating lookalike audiences. Include the newly defined lookalike audience in your acquisition campaigns, and you will attract more new high-potential customers like your existing best customers.