Why You Should Protect Your Customer Relationships
A business maintains many important relationships with its stakeholders, including customers, employees, suppliers, owners, and neighbors. However, one relationship stands out: the relationship with its customers.
Unfortunately, some small businesses view a customer as purely transactional. Once a sale has been completed, they move to the next customer. Consequently, these companies tend to focus their marketing activities on finding new customers rather than developing a mutually beneficial relationship with their existing clients.
In my experience, these businesses miss a significant revenue opportunity while also incurring unnecessarily high marketing expenses.
Suppose a potential customer is looking for a specific product or service and comes across your advertisement. Before placing the first order, they have many questions on their mind. Is your business legitimate? Will your service be as impeccable as you claim? Or will your product be as good as advertised? These new customers naturally hesitate before they feel comfortable placing the first order, often a smaller "test" purchase that limits their financial risk of making a wrong decision. I do this all the time, and I am sure you too.
Customer Lifetime Value
If your business mainly focuses on attracting new customers, you will forego the total lifetime revenue potential that loyal repeat customers could bring to you.
Marketing professionals call this concept Customer Lifetime Value (CLV). It measures a customer's total worth to your business throughout your relationship.
► What Is Customer Lifetime Value (CLV) and Why Small Businesses Should Embrace It
However, the implementation of CLV has two crucial prerequisites:
You need to know who your customers are and
You need to have the ability to contact your customers during that relationship by email, text, or phone to send them, for example, an upcoming promotion, a weekly newsletter, or regular updates on their loyalty points.
Given each customer's conceivably significant lifetime value, every small business owner should be highly motivated to guard their customer relationships and develop them further.
Online Marketplaces
Online marketplaces are big e-commerce sites that offer a large selection of products from many different sellers. Some of the most popular sites are Amazon, eBay, Etsy, Google Express, and Walmart. There are many more niche players.
The Advantages
The main advantages of selling on an online marketplace usually come in three ways. They offer you immediate access to a large customer base, handle fulfillment of the orders from their warehouses, and provide a uniform billing experience to their users. As online marketplaces take over these essential tasks, they give you more time to produce products.
The Downsides
By selling on an online marketplace, you relinquish the relationship with your customers. Instead of you, now Amazon, Etsy, etc., own that relationship. Since your role is exclusively transaction-based, the customer lifetime value diminishes to the value of the order the customer has just placed.
Any customer loyalty is with the online marketplace and not with you as a seller. In that setup, there is no room for you to tell your own story or promote your brand to differentiate your products from your competition. Since the products on these marketplaces tend to commoditize, they become indistinguishable and interchangeable, as do the sellers. In that scenario, on-platform advertising and favorable customer product reviews remain some of the few available tools to boost your sales. However, a few bad reviews — legitimate or fake — can severely lower your turnover.
Conclusion
Because every company is different, there is no clear answer to whether selling on an online marketplace leads to more profitable revenue in a given timeframe than selling through your own online store. It depends on many factors, including your goals.
However, if you want to create long-lasting customer loyalty through your products and tell your story, then selling on an online marketplace that mutes your cause and controls your customer relationship may not be the best way for your brand.
