A few weeks back we covered the Top 10 UX Must Read Books this year. One of the books is Lean Analytics, part of the Lean series by Eric Ries. In the book, the authors – Alistair Croll and Benjamin Yoskovitz – take a look at the different metrics that are important for different kinds of digital properties. One of their models is about ecommerce websites.
Ecommerce websites can be divided into three types – acquisition, hybrid, or loyalty – based on the percentage of repeat customers year over year.
Acquisition – Less than 40% of your customers are repeat buyers year over year.
Hybrid – Between 40% to 60% of your customers are repeat buyers year over year.
Loyalty – More than 60% of your customers are repeat buyers year over year.
Separately, there are a lot of different ways that people have sliced up the Customer Buying Cycle. There’s what Dave McClure termed “Pirate Metrics” because the acronym is AARRR (Acquisition, Activation, Retention, Revenue, Referral). Or something like this chart. You can find variations all around the web.
The question is, how do these two pieces of knowledge help us with budgeting?
As it turns out, the customer lifecycle / inbound marketing funnel can be reduced to having a beginning, a middle, and an end. Or to be more precise, it’s getting traffic to your website, getting them interested enough to purchase, and then getting them back again as well as getting them to refer new business.
Considering the buying cycle in this fashion, it becomes easy enough to see how emphasizing the Beginning part is key to Acquisition ecommerce sites. Emphasizing the middle works well for a hybrid form, and for loyalty, emphasizing the end (the customer relationship) is where it’s at.
In today’s podcast, we dig into this idea and talk about more specific strategies for further developing your online marketing budget and also consider what role UX should play and how much you should spend on it when developing your budget.