According to a study from RJMetrics, flash-sale businesses vastly outperform traditional online retailers when it comes to growing customer lifetime value in a customer’s first year. The study also highlights the finding that over the long haul, customers acquired via Facebook advertising are more valuable than those acquired via Google advertising.
The study, titled “eCommerce Customer Lifetime Value: Summer 2012 Benchmark,” aggregated sales data from 48 online retailers in the areas of traditional online retail, flash-sales, daily-deals and group-buying sites. Information collected included lifetime spending, repeat-purchase rates and time between purchases.
Here’s how RJMetrics defined each group:
Daily-deals companies offer a single deal each day
Flash-sales businesses offer deals with limited inventory that can exist over multiple days
Group-buying companies offer deals where multiple members must commit to a deal in order to activate it
Traditional online retail: offer a mostly static inventory of merchandise via a publicly available storefront
The first three groups are dubbed “next generation” or “next-gen” online retailers.
RJMetrics found that traditional online retailers had a median time between purchases of 89 days. This same metric was 52 days for group-buying companies, 49 days for flash-sales companies and 48 days for daily-deals companies.
The study mentioned that the relative similarity between the time between purchases for next-gen online retailers was “noteworthy.”
However, when it comes to average order sizes, traditional online retailers trump their next-gen cohorts. The average order value (AOV) for traditional online retailers was $105, compared to $82 for group-buying retailers, $61 for flash-sales retailers and $61 for daily-deals retailers.
RJMetrics also looked at the rate at which the average customer’s lifetime spending increases from the 30-day mark to the 365-day mark – or the rate at which their spending grows in their first year as a customer.
Traditional online retailers captured an additional 94 percent of what a customer spends in their first 30 days during the remainder of their first year as a customer, while daily-deals retailers boasted a 143 percent mark, group-buying retailers displayed a 150 percent mark and flash-sales sites exhibited a 385 percent mark.
“Studying the top 10% of performers for this metric reveals that some retailers have a tremendously strong ability to drive repeat purchases,” RJMetrics notes in its report. “Top-decile retailers have customers who come back to spend over 600% of their first purchase amount in their first year as customers.”
Also included in the study is the finding that customers acquired through Facebook ad campaigns yield $159 in customer lifetime value, compared to $148 for customers acquired via Google ads.