by Anand Srinivasan, founder of LeadJoint.com
What exactly is the success rate of an eCommerce store? Some experts claim that only 20% survive. Others argue that the failure rate can be as high as 97%. If you are a company that sells eCommerce tools, this cannot be good news. How do you plan on retaining customers when so many of them are failing?
Several months ago, Shopify, one such eCommerce platform provider, launched Exchange, a marketplace that allows users to buy and sell online stores that are hosted on their platform. Looking to liquidate your hugely successful store? You could put it up for sale. Did you just realize eCommerce is not for you? You could sell such businesses too to someone who understands the game better. In other words, Shopify is making it easier for customers to end their relationship with the platform by transferring their ownership.
This raises an interesting question – what is more important to you as a marketer? Should you be looking at retaining your customers, or merely their transaction? At a time when customer retention teams go out of their way to cling on to their base of customers, should you be making it easier for them to quit?
The opportunity cost.
One way to look at this is through opportunity cost. In the marketplace scenario explained above, there are two customers you are working with. The seller is someone who wants to end their transaction. This is a customer you might be losing anyway (unless they already own multiple stores, like is often the case with eCommerce platforms like Shopify). On the other hand, the buyer might be a new customer who may either sign with you or with one of your competitors. By making it easy for the seller to transfer their business to the buyer, you might be losing one customer, but could be retaining a relationship that might have otherwise ended.
Better customer experience.
Taking your focus away from customer retention and instead focusing on a transaction-based relationship is also good from a customer experience point of view. If you run a sports facility or a theater, you may be able to sign up only a finite number of customers for any particular event slot. Such businesses often prohibit the transfer of ticket ownership. This is typically done to prevent black-marketing of tickets. But these types of measures can often lead to having empty seats in the stand. By permitting the customer to leave and allowing others to take their place, you are focusing on the transaction. This way, you enable only the most desperate customers to stay with you. This also improves customer experience since your biggest fans come to you while others are given a chance to go elsewhere.
Enables continuity of business.
Paypal is a good example of a business that is against transfer of ownership. If you are operating a subscription service over Paypal, you will not be permitted to transfer these subscribers to another Paypal user when you sell this business. Subscribers are required to unsubscribe from the service and re-subscribe once again once the ownership has been transferred. This disrupts business continuity and impacts a B2B service provider like Paypal in two ways. Firstly, business customers lose their subscribers during the transfer process which also means loss of commission fees paid to Paypal. Also, the discontinuity in business operations forces the new owner of the subscription service to migrate the subscription service to a competitor platform that allows transfer of ownership. Either way, this creates friction in the process and makes your customer unhappy.
So are there any drawbacks at all?
While allowing customers to transfer ownership of their account improves experience and lets you retain the more valuable customers, this strategy is not without its fair share of issues. In some industries, such a policy can be a legal landmine. This is especially true in the case of the ownership of mobile phone numbers or social media accounts where it can be difficult to establish ownership in the event of a crime. While mobile network providers don’t always deny transfer of ownership, they may require extensive paperwork precisely for this reason. From a marketers’ perspective, account ownership transfers can also disrupt your customer lifecycle. Marketers look at customer behavior, including their termination to understand the issues with their product; this is a critical component of the feedback loop. Ownership transfer can distort this information and relay misleading data to marketers which could lead to wrong inferences.
Overall, the benefits of allowing customers to transfer their accounts to other customers far outweigh the regulatory and analytical challenges that this process presents. It may not be a bad idea to give this method a try in your business.
Anand Srinivasan is the founder of LeadJoint.com, an online lead generation tool for digital marketing agencies. He is also a part-time marketing consultant and has previously worked with some of the most promising Indian startups.