Obviously, young consumers are a perpetual target for brands; that’s no surprise. However, a single-minded focus on younger consumers can lead businesses to miss other opportunities.
People under 35, for example, are costly to acquire and often possess fewer financial assets. As a result, these consumers tend to hold little brand loyalty. Instead, they take a more frugal approach, considering reliability and quality relative to price as the most important factors in their decision making process.
Compare that to consumers over 50, who’ve retained their influence on the market as they age. They control an overwhelming majority of the wealth in our economy, and will continue to do so for at least the next decade. Visa predicts that consumers over 50 will represent 51% of spending by 2020, while those under 35 represent just 18%.
With an annual $7.6 trillion in economic activity, consumers over 50 are the real power players in the US economy. But, can you really attract older shoppers to a dynamic, fast-changing eCommerce market? Of course you can.
The stereotype of older buyers as “anti-tech” doesn’t hold up to scrutiny. Survey data from the AARP shows that 91% of consumers over 50 own a computer, 75% own a smartphone, and 49% have a smart TV. Older buyers are affluent and hungry for tech; in all, adults over 50 will spend $84 billion on technology products by 2030. So, the market is there, as is the audience. All you need is the right approach to reach them.
LTV and Older Consumers
Shifting your marketing efforts to focus more attention on the over-50 crowd could pay off. Rather than sticking to the traditionally-coveted 18-35 demographic, try directing marketing efforts to the consumers with disposable income and built-up wealth.
No matter your target audience, the key point to always keep in mind the balance between cost of acquisition and customer lifetime value, or LTV.
Your LTV takes the total amount spent by a customer through their complete lifetime relationship with you, in comparison to the total cost of acquiring and retaining that customer. Be careful not to overestimate or underestimate your projections; you want to be as realistic as possible.
Ask yourself: what is my value proposition? What sets my product apart? How much will it take to convince a customer to buy? These are all questions that influence acquisition. Using them as a guide, you can determine how much is a reasonable amount to spend on acquiring a single customer.
Shifting to Retention Rather than Acquisition
Of course, trying to acquire older consumers isn’t enough. You need to retain them, too.
While the baby boomers who make up most of the over-50 consumer base are not as brand-loyal as Gen-X, they are still much more likely to keep coming back than their under-35 counterparts. That said, you can’t rely on brand loyalty alone; you need to work to retain buyers, and turn them into loyal customers.
This is a challenge for many ecommerce sellers. In this market, a substantial number of buyers prove to be one-time purchasers. They’re drawn by loss-leader deals, or by a specific need that, once fulfilled, doesn’t inspire any further interaction.
Unlike LTV, where you want to get as accurate a picture as possible, there’s no single “best” answer here. Instead, a combination of engaging content, an active social media presence, and careful monitoring of the conversation as it pertains to your business is best. Especially with buyers over 50, it helps to offer special gifts or deals to encourage repeat visits. This will help boost loyalty, open the possibility of referrals, and even reduce loss in the process.
One-time buyers are not loyal and engaged customers who have some attachment to the brand. Thus, they’re more likely to generate returns, refund requests, and chargebacks.
As it stands, about 30% of online fraud losses are the result of chargeback fraud, and another 27% are from fraudulent refund requests in the online environment. And, while fraud costs as a percentage of revenue (including fraud mitigation, declines due to false positives, etc.) average 1.8% for all retailers, the total climbs to 2.38% for ecommerce merchants.
Once you build a rapport with customers, they’re far less likely to engage in the behaviors mentioned above. They see you as a group of people, rather than a faceless site on the internet. And for consumers raised in the pre-internet age, that’s the vital connection to make.
Monica Eaton-Cardone is Co-Founder and COO of Chargebacks911