Back on the Amazon story a little…

It’s extremely important in business to keep your customers happy, a happy customer is a repeat buyer, it’s cheaper to have an existing customer buy again than it is to acquire a new customer.

It typically costs 30%+ more to make a sale from a new customer, than it does an existing.

How so?

Simple, to acquire a new customer alone it requires marketing, and most of the time sales support. Both cost time and money.

Something people don’t often factor into their marketing spend is the time that it takes to produce the marketing campaign as well. Even though say your cost per click is $1, and you get 100 clicks a day – total daily spend of $100, you might have spent a week designing the campaign and the landing page for it etc (collateral).

Your time for the week is worth say $1,000. So your monthly spend on the campaign could have been 30x$100 a day ($3,000) + the 1 week setup and the additional 1 day a week for monitoring the campaign ($1,500) which is a total for the month of $4,500.

So your monthly cost per click which in theory was $1, is in reality $1.50, a 50% higher rate than expected.

So you’re spending in theory, $4,500 a month on brining in new customers, a small portion of which will actually make sales, but to make a sale of an existing customer, who’s not an active buyer already would only take a phone call, or an email, either a personal email or a newsletter, these things only take minutes to a couple of days to achieve, and if you have a database of say 3,000 names, you could drum up a higher conversion rate than your CPC campaign is achieving, mostly because these customers have dealt with you before, they know and trust you and should be happy to buy from you again.

In theory you would have only spent $500 to make more sales than your $4,500 from your CPC campaign with a higher profit margin since your profit from the sales aren’t having to cover marketing expenditure.

In saying that, it doesn’t mean you should stop marketing to attract new customers, it means your new customer acquisition marketing should be just that, targeted at new customers, not everyone.

You should have different marketing strategies, one for new and one for existing. Your new customer acquisition marketing should be competitive with your competitors and offer something more, and your existing customer marketing should offer them reassurance on customer service and a comeback and buy again deal, maybe a discount for being a loyal customer.

Amazon has done the right thing here, they put a public apology on their front page of their site, not any old small apology either, it’s huge and it’s designed to really push the point across.

Why? Well its good business, actually, it’s really good business, happy customers are customers that are repeat buyers, on top of that happy customers also give good word of mouth referrals, as opposed to unhappy customers that do the opposite.

On top of that by putting the message out there publicly they are also taking a load of support.

Amazon are having a real issue manufacturing enough of their kindle book readers to keep up with demand, rather than dealing with a large number of support questions every day from customers wondering where their kindle is, they have put out the message to their existing customers who have purchased one, to everyone else who might buy one and to the general public that they are aware of the issue and are committed to doing the most that they can to fix it.

It’s a win for the support team – inquiries will go down.

It’s a win for people waiting for their kindle, they have some news on what’s going on and they know Amazon is working on the issue.

It’s a win for Amazon – it shows potential kindle buyers that even though there’s no stock right now, that Amazon are committed to increasing their output and are committed to supporting their customers.

And It’s an additional win for Amazon, even though that large image took away every product on the front page that would generate tens of thousands in sales typically it shows that Amazon cares about their customers more than making sales, it shows that there IS support, where most other companies really lack support and it shows that Amazon isn’t afraid to tell their customers the truth, not make up BS stories to buy more time.

I doubt that it would have hurt sales anyway; people would still search the site and do their usual shopping.

I mentioned a while ago that Google can’t sell anything but search, Google Checkout is no exception.

Google Checkout is a payment processing service that competes with services like Paypal on processing payments for shops, I’ve yet to see any shop use it that I’ve purchased from, but I’ve made heaps of Paypal purchases. Google are trying so hard to compete with this product that are offering free credit card processing and no monthly setup or gateway fees at all for sellers, not only that, Googles payment guarantee protects 98% of orders, if there’s a chargeback, you don’t have to pay anything, you still keep that payment.

It’s a pretty good deal.

But it would seem they have a new competitor, one with lots of money that could eat into that market share they are trying to steal from Paypal and others – Amazon is expanding their reach into the payment processing arena with the launch of an expansion on their current payment web services they offer, it’s not launched yet, but there’s talk of a launch of the new service as early as next week.

Keep an eye on the Amazon web services page for updates.