The free-shipping fallacy is crashing. From the beginning, Amazon built its e-commerce empire partly on that very promise. Buyers flocked in, initially lured by no-cost shipping on orders over $25, quietly bumped to $35 in 2013. But this spring, the threshold was upped again to a hefty $49, leaving bargain shoppers to search for cheaper alternatives, or pony up $99 for Amazon Prime.
Building loyalty in the golden age of e-commerce, when instant price comparisons and competitors’ products are often just a click away, isn’t easy. Free shipping, rewards programs and membership bonuses may seem like differentiators. However, at the end of the day these perks are often shaky footing to build a long-term relationship on.
The key to customer loyalty in the e-commerce era may well be something altogether different and often overlooked: It’s about managing risk. Companies who find ways to take the burden of risk off of customers’ shoulders and bear it themselves create the foundation on which real loyalty is built – trust. Here’s how.
Make it easy for customers to try before (and return after) they buy
One of the biggest obstacles to e-commerce is uncertainty. Whether buying sneakers or wood flooring, people want to see, feel and try stuff on before they commit. But the best e-commerce players are finding new- and old-school ways to mitigate that risk both before and after shoppers click the buy button.
Let’s look at the pre-buying stage, where samples, both real and virtual, can go a long way. BuildDirect, for instance, has a dedicated warehouse and logistics branch just for handling the thousands of free samples a day – from flooring to shingles – we ship to customers. For stuff that can’t be mailed out as samples, we built a virtual design center, where customers can plug in their home’s specs and “try out” different fixtures, furnishings and more online. Another key element is having a fully staffed team of product experts, available by phone, whom customers can talk to seven days a week. Talking to a real person – who actually knows their stuff – isn’t high tech at all, but it’s a powerful way to clarify questions and resolve doubts.
On the cutting-edge front, VR and AR are giving customers entirely new ways to interact with products online before purchase. Brands, like NARS makeup, are already exploring the potential of Facebook 360, which allows users to navigate 360-degree videos, seeing products from all angles. Meanwhile, Carnival Cruise has begun selling travelers on its vacations with a fully immersive VR experiencethat uses Samsung’s GearVR headset. Cheap alternatives like Google Cardboard promise to bring VR to an even wider audience in the months ahead.
Equally important is mitigating shoppers’ risks after they buy. To me, there’s no more effective way to do this than a money-back guarantee and no-questions-asked return policy. But I had doubters about this even within my own company: early on, our VP of Finance claimed our return policy would bankrupt us. In my mind, he was overlooking a fundamental principle. Buyers are rational: They’re not going to waste their own time ordering, opening, then returning unless there’s a very good reason. Not to mention, those returns are an invaluable feedback mechanism: customers are letting us know, in no uncertain terms, what’s not working and what needs to be changed. Many other successful companies have made the same calculation. Traditional retailers like Costco and Walmart, for example, learned long ago that liberal return policies are a cornerstone of customer loyalty.
All of this entails expense. It’s not cheap to shoulder risks on behalf of buyers. But these investments make for far more confident shoppers – an attitude shift that’s reflected directly in “conversions.” E-commerce conversion rates (the ratio of actual buyers to site visitors) generally hover around 2 to 4 percent. Online businesses that make trials and returns easy, however, leave those rates in the rearview.
Offer total product transparency
It may sound counterintuitive, but an online merchant can be far more transparent than a store where you can literally touch the merchandise. At a click, an e-commerce platform can offer extensive product information on sizes, features, pricing and more. By now, this has become old hat, but it’s worth recognizing what a true advantage this represents over traditional retail. Then you have customer reviews, which are trusted by 88 percent of online consumers. For online retailers, a fair and unbiased review system can serve to build enormous loyalty among shoppers. This kind of crowdsourced feedback is simply impossible to get in a brick-and-mortar setting and represents a huge strategic edge.
What’s absolutely critical, however, is that these reviews be unfiltered. Fake reviews notwithstanding, you have to share what people are actually saying about your products – warts and all. This generates trust, first and foremost. Second, authentic negative reviews are good feedback that, along with a no-hassle return policy, helps you get rid of products your customers won’t want anyway.
Finally, consider this: a few negative reviews in between a large number of positive reviews can actually boost conversions by assuring the customers that the reviews are authentic. As one Forbes writer put it, “love your customers, hug your haters” – and transparency will ultimately keep customers coming back.
Respect the integrity of customer data
Here’s a dirty little secret from the world of e-commerce. Those product suggestions you get when you’re searching your favorite site don’t always refer you to the best matches for you. Often, they’re directing you to the best matches for the company. Instead of personalized choices, you’ll see items with the highest profit margin, cheapest shipping or extra stock they’re desperately trying to unload. While many customers are willing to hand over detailed personal information for more personalized e-commerce suggestions, 40 percent feel that the resulting promotions fail to deliver anything of interest.
Ultimately, these shortcuts work against building brand loyalty. For starters, shoppers are smarter than you think: they know when they’re being hoodwinked. Moreover, for companies that are trying to offer truly personalized choices, this kind of profit-based targeting introduces biases that can corrupt algorithms. You’re never going to know what buyers truly want, if you’re constantly force-feeding them what you want to offload. By building your system around individual persona, carefully curated data and the habits of like-minded buyers – rather than the secret agenda of the sales team – you’re able to use data to your customers’ advantage, and everyone benefits.
In the end, building loyalty in the age of e-commerce comes down to something very simple but counterintuitive: trust your customers; don’t expect them to trust you. Make it as easy and risk-free as you can for them to find and buy what they really want and return what they don’t, and they’ll keep buying from you — whether or not you have free-shipping or a fancy VIP rewards program.
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