Management & Finance

How to Combat a Shiny New Competitor

Relative to leasing retail space, buying shelves, and investing in a store full of inventory, ecommerce offers a low barrier to entry. In fact, just about any entrepreneur with a bit of capital and tech savvy can sell online. This means, however, that established, small and mid-sized online retailers are bound to face competition from new retailers too.

Starting an ecommerce business can be relatively easy. But once an ecommerce business is up and running, it’s bound to face competition from even newer companies.

…once an ecommerce business is up and running, it’s bound to face competition from even newer companies.

When a shiny new competitor enters the market it often invests (even dumps) advertising dollars into pay-per-click ads and search engine optimization to gain a share of the market. But established ecommerce retailers have at least four ways to compete with the interloper: creative marketing, stellar customer service, unique offers, and loyalty incentives.

1. Be Creative with Your Marketing

Many, if not most, online retailers use the same marketing tools to attract new customers. This typically includes things like the aforementioned PPC ads, banner advertising, and even product placement in marketplaces like Amazon or Newegg.

Rather than trying to match the new competitor in advertising, consider being a more creative and making use of established customers to gain new ones.

As an example, consider running a contest with a large prize. Invite existing customers to enter, and give them additional entries into the contest when they refer a friend. The referral invitation can include a special offer, like a 20-percent discount. Monitor how many sales the contest generates. It might even be less expensive than buying PPC ads.

Another option, albeit a little less direct, is to invest in content marketing (such as how-to videos) and, again, encourage existing customers — for example, those who are on an email list or who are followers on Facebook or other social media platforms — to promote and share that content. The hope is this content will, in turn, attract new customers.

Finally, rather than competing with standard PPC ads, try pre-roll advertising on YouTube, or radio-style commercials on Pandora.

2. Provide Stellar Customer Service

One of the greatest challenges facing new ecommerce businesses is how to manage customer service. Thus, incumbent online retailers can use experience in this area to be more competitive.

To fend off competitors, consider emphasizing exceptional customer service, such as offering favorable return policies and implementing live chat during peak hours. When customers comment that they appreciate the customer service, encourage them to provide a positive rating on services like Google Shopping and to give your company a nod, if you will, on social media.

In effect, provide stellar customer service and make certain that everyone knows about it. Finally, include your customer service promises and performance in your ads.

3. Make Unique Offers

A new competitor’s customer might be your old customer. It sounds complicated but it means that some of your existing customers, even folks who have made a couple of purchases, might try a new competitor that is spending a lot on advertising.

To help prevent this, consider using email marketing or after-the-sale promotions to feed existing customers a steady diet of offers during your new competitor’s start up period. Once you’ve weathered the storm, so to speak, return to normal levels of offer-based marketing.

As an example, imagine a shopper who has made a purchase. A few days after that purchase, the retailer can send a thank you email, telling the customer how much his order was appreciated. Along with that email, the retailer might include an offer for some percentage off of a subsequent order, a free gift with his next purchase, or similar.

Also, if an online retailer has done a good job of segmenting customer email lists, it is possible to send much more relevant offers that make more sense for an individual customer.

4. Offer Loyalty Incentives

Bloomingdale's "Loyalist" is a good example of a simple loyalty program that can help merchants retain existing customers.

Bloomingdale’s “Loyalist” is a good example of a simple loyalty program that can help merchants retain existing customers.

Bloomingdale’s, the large brick-and-click retailer, has one of the best (simplest) customer loyalty programs in the business. With the Bloomingdale’s Loyalist program, shoppers receive a point for every dollar they spend. When the reach 5,000 points they automatically receive a $25 Bloomingdale’s gift card.

Bloomingdale’s also awards extra points for select product categories. As an example, the retailer’s customers get two points for each dollar spent on cosmetics.

This simple loyalty program might be just the sort of competitive tool for an established ecommerce business. Offer customers the opportunity to join for free and start earning points immediately.

Also, offer point specials. As an example, on traditional slow periods of the week or month, send out an email offering double or triple points for purchases made in the next few hours.

Be certain to let shoppers know how many points they have and how many purchases they need to earn a reward.

Armando Roggio

Armando Roggio

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