Hack52.Create Visitor Loyalty Segments

Hack 52. Create Visitor Loyalty Segments

Merely watching your percentage of returning visitors rise and fall is not enough to understand visitor loyalty. You need to segment your visitors in profitable ways to truly understand and identify opportunity.

Converting more visitors into customers is absolutely essential to any successful business effort, but then what? You probably already know the answer: it's time to think about whether these customers will visit or purchase again. If they don't visit or purchase again, then your efforts to attract and convert them in the first place could be money losers.

Your particular web site may not need to create repeat visitor and customer behavior, but most web sites do. Customers who come back over and over generally have the highest value, and this value translates into profits for your business. Most web customer databases have from 80 percent to 90 percent one-time buyers or visitors. For an offline comparison, you could look to the catalog or TV shopping companies, where the one-time buyer rate is 40 to 50 percent. Why are web sites so ineffective at creating repeat visitors and buyers? Asked another way: why is the average value of a web customer so low when compared to offline customers?

Notice I said "average value." Some web visitors are, in fact, worth a lot. But there are so many that are worth very little that the average value of a visitor is quite lowthat is, for most companies. Other companies seem to create visitors of much higher average value. For example, the online exotic pet store that generates $3.50 in sales per visit and has an 85 percent repeat buyer rate. Or the online specialty jewelry store that generates $25 in profits for every $1 spent on advertising. Or the content site with 5 million unique visitors, 90 percent of whom have visited at least once in the past 10 days. How do they do it? They understand the metrics of customer loyalty and valuethe art and science also known as customer retention marketingand apply these metrics every day in their analytics to drive higher marketing ROI. And they constantly test new ideas and measure the results based on the long-term value of their customers.

In short, they analyze visitor and customer behavior not just in the present, but also over time. And they use specialized time-based metrics to predict what visitors and customers will do in the future.

3.17.1. Use Visitor Segmentation to Measure Visitor Loyalty

You are probably already familiar with the simplest definition of web visitor retentionthe repeat visit. A visitor who comes back to the site again and again is a generally good thing, especially if you bought ads to encourage the first visit. But are you using the real power behind this metric to drive increased profitability? Let's find out and, at the same time, learn how visitor segmentation [Hack #48] can be leveraged to understand visitor loyalty.

Many people track the overall percentage of repeat visitors. If this percentage is rising, that's good; if it is falling, that's bad. This metric makes intuitive sense to people and is at least a measure you can hang your hat on. But it's not terribly actionable; that is, standing by itself, repeat visit percentage doesn't provide any direction on what you might do to improve it.

To get more specific direction, you really need to segment your visitors to the repeat behavior of customers sharing some characteristic that allows you to make judgments about the value of the different customer groups and take some kind of marketing or design action based on this judgment. When you group visitors or customers by a common characteristic, any behaviors they sharelike tendency to repeat visitsbecome amplified. By comparing your metrics across different visitor segments, you can more easily spot differences or trends and take action on them.

3.17.2. Profitable Loyalty Segmentation Strategies

How should you divide up or segment your traffic to analyze the percentage of visitors repeating? There are hundreds of ways to segment provided in most web measurement applications, and here's the hack: only five of them really affect the long-term behavior of visitors in a way that can make you more money.

3.17.2.1 By media source of the visitor.

Segment based on search engines versus banner ads, or compare the repeat rate of visitors generated by different banner ads or keyword phrases. There can be huge differences in visitor behavior by source. Those of you already involved in pay-per-click marketing know what I'm talking about here, and the good news is if you are tracking source for your short-term conversions, you're already tracking what you need for longer-term loyalty and value metrics. Visitor source is the king of segmentation characteristics, and action taken in this area leads directly to bottom line improvements.

3.17.2.2 By the "offer" you make to the visitor.

For commerce sites, offer is pretty self explanatory. For other types of sites, think about what you do to encourage visitors to do what you want them to do. This is your "offer." Whether it is a software download, white paper, game or interactive device, product sample, communications options, or newsletter, your "offer" has a significant effect on the retention of visitors. Test new offers regularly.

3.17.2.3 By the advertising copy you use.

Ad copy is often closely tied to the issues in offer above. You can make the same offer in several different ways, and the way an offer is made will define the quality of the visitor segment it attracts.

3.17.2.4 By content area.

Ask yourself, which areas of your site create the highest repeat visit percentage, and which create the lowest repeat visit percentage? Compare high and low scoring content areas to understand whatmight be causing the difference in repeat rate. Is it the content itself? The navigation? If you make a design change to a section of the site and the percentage of repeat visits drops, you should probably reconsider the changes.

If your web site is in the self-service category, you may have to look at this measurement in reversethat is, there may be parts of your site where you would like to see repeat visit percentage decrease. For lead generation sites, it might go either way. For a long sales cycle or high-ticket product, repeats may be good because this behavior demonstrates ongoing interest. For a short sales cycle or low-ticket product, one might wonder why it takes repeat visits to convert the visitor and strive for decreasing repeat visits. For branding sites, repeats demonstrate loyalty and ongoing brand involvement, so high repeat rates would be desirable overall.

3.17.2.5 By category or item of purchase.

Loyalty segmentation based on category of item purchased should be further segmented into first-time and repeat buyer segments. This will tell you which products are most profitable in the long term to feature or promote to new and current customers. It's not as important to understand why certain products generate repeat behavior. Simply understanding which products generate repeat behavior is a very powerful tool. As you can see in Figure 3-18, a typical report for understanding visitor loyalty segments for online retailers, this strategy can be used to examine relevant commerce metrics by "New Buyers" and "Repeat Buyers."

The power of this type of segmentation, however, really lies in being able to see differences in metrics, such as the average revenue per order for televisions: $1,475.56 for new buyers and only $524.95 for repeat buyers. Data like this should have you asking "What is it about new buyers that makes their television purchases so profitable?" and "How can we replicate this behavior throughout other product categories?" If you aren't segmenting loyal visitors, you won't have access to this type of data and will always be forced to deal with averages.

Bottom line, there really is no such thing as an "average visitor." By segmenting your visitors, you will begin to uncover powerful differences in their behavior, and taking action on this knowledge will lead you down the road to increased profitability.

Jim Novo and Eric T. Peterson

Figure 3-18. Purchase categories segmented by visitor loyalty