You may have heard that guest checkouts are a great way to increase your sales. However, I want to challenge this popular belief. I’m going to show you that while guest checkouts might inflate your sales, they actually have a long-term negative impact on your business.
Guest checkouts are not likely to come back after the initial sale. Registered customers are primed for repeat purchases.
Let’s take a look at 6 reasons guest checkouts weaken your brand.
Guests increase your acquisition cost
Way too many brands put their marketing budget into online advertising, thinking that if they can entice enough clicks and convert enough visitors their business will continue to grow.
Online ad prices are increasing at a pace 5 times faster than the rate of inflation.
- Adobe Digital Insights
While this approach might seem like its working, it’s actually doomed from the start. Since online ads cost more and more every year, the cost of acquisition eventually eclipses the value of each acquired customer, creating an unsustainable illusion of growth.
Acquiring new customers is between 5 and 25 times more expensive than retaining your existing ones
- Harvard Business Review
The benefit of repeat customers is that you’ve already acquired them, so each additional purchase is adding to your profits instead of taking away from them. The more you spend getting brand new customers, though, the less profits you have to build an exceptional brand experience. This will not only impact your repeat customers but also anyone discovering your brand for the first time, keeping you stuck in the unsustainable cycle of acquisitional growth that will sink your revenue and your brand.
Guest only care about discounts
Think back to the last time you made a purchase as a guest — what made you do it? I bet your reason was the same as many of your own shoppers: discounts, sales, promotions.
Guest shoppers aren’t interested in your brand. They’re interested in getting the lowest price.
When you attract shoppers to your website by running a big sale or offering massive discounts, you don’t give them any reason to register as a customer and join your brand community. Instead, their allegiance is to the almighty dollar, not the values that your brand represents.
This means that each additional purchase guests continue make with deep discounts cuts into your bottom line. Since bargain hunters aren’t satisfied with the same old prices, you’ll need to run even bigger sales to bring them back, further cutting into your profits. As a result, you find yourself inside a death spiral of discounting that destroys your revenue and business in the long term.
Guests will always shop wherever it’s least expensive, regardless of who’s selling it.
At the same time, your community members will begin to feel that all of your discounting efforts are only for the benefit of new customers, breaking their trust in your brand. They may even end the relationship with your community that you worked so hard to create, choosing instead to build one with a brand where they still feel valued.
This type of abandonment not only means members aren’t going to make any more purchases, but also that they will be giving their money to your competitors, putting you even further behind.
Guests won’t engage with your brand on social media
Social media is an effective brand awareness tool, but even if you have over a million followers and a good social engagement rate you’ll still only get interaction from 2-3% of your followers.
Without engagement, social media followers are meaningless.
As a result, your goal shouldn’t be to amass as many followers as possible but to get as many of your followers engaged with your brand as you can. This is because engaged followers build the long term relationships with your brand that lead to more sales, and they do this by engaging with all of your value-add content.
Whether your post videos, blog posts, or share your customers’ photos, everything you put out on your social channels should elevate the customer experience. The easiest way to do that is by rewarding customers for engaging with you on their own channels. With rewards, your community members are given all the value your content has to offer and then compelled to stay engaged in order to be rewarded. All of their sharing and other social engagements ultimately give value back to your brand, making it a two-way exchange of value.
Guest checkouts aren’t involved in this value-adding experience, though. Having opted out of your community, they’re also opting out of enjoying any of the valuable social content you create. Without experiencing your community for themselves, guests won’t feel prompted to create valuable content or engage with your brand on social media beyond a meaningless follow, making them incredibly not-valuable.
Guests aren’t motivated to review your products
Whenever I purchase something online, whether it's clothes, electronics, or anything in between, I always check user reviews. Many shoppers tend to trust online reviews just as much as their own friends, largely due to the the social proof, or public trust, that reviews create.
The trick is actually getting the reviews. Even if customers are willing to leave them, it can be difficult to motivate that valuable behavior. However, when you have a community of delighted customers you can make leaving reviews a rewarding experience for them by offering them points that they can exchange for rewards.
Guests opt out of leaving you reviews when there isn’t anything in it for them.
This motivation doesn’t apply to guest checkouts, though. Since they aren’t part of your community, guests don’t receive the same incentives that your reward program members do in exchange for reviewing your products. As a result, leaving a review and contributing that valuable social proof to your community is the furthest thing from your guests’ minds.
This creates a vicious cycle that ultimately slows down your community’s growth. Since new shoppers aren’t going to be able to find reviews that demonstrate the value of your products, they will be less motivated not make a purchase.More importantly, they will be less inclined to make an account and officially join your community, closing them off from the possibility of making another purchase in the future.
Guests don’t have a reason to refer their friends
We all like to think that when customers like our products or brand that they’ll tell other people about it. Unfortunately, this is not the case. Even customers who are absolutely delighted by your brand experience are going to need motivation to share it with their friends.
83% of satisfied customers are willing to refer products and services, but only 29% actually do.
- Texas Tech University
The best way to encourage customers to share their positive experiences with your brand is through a referral program. By offering your members something valuable like discounts or points, they get just the right amount of motivation to become brand advocates without breaking the bank.
This motivation, then, is what separates guest checkouts from valuable members. When shoppers check out as guests, they remove themselves from the benefits of your referral program. Even if they do like your product, they don’t have any reason to share your community with others. Without more people learning about the value of your brand the community building loop is broken.
Failure to harness the sharing step means your members can’t grow your community organically and make it a true cycle. This means you’re still reliant on finding new customers to join all by yourself, instead of taking advantage of your delighted brand advocates to let them do the heavy lifting of growing your community.
Guests deliver one time value
At the end of the day, you want to be investing your time and money into the customers that drive the most value to your business. However, do you know who those customers are?
If you’re spending more resources on acquiring new customers than retaining the ones you already have, you are prioritizing the wrong customers. As we already discussed, acquiring new customers is much more expensive than retaining your existing ones, but that’s not even the worst part!
One time customers make up 92% of your customer base and only contribute half of your revenue.
- Adobe Digital Insights
When you consider the breakdown of your customer base, your one time customers make up a whopping 92% of your customer base but contribute only a bit more than half of your revenue. That means your repeat customers deliver more than 10 times more value! So all the efforts you’ve made to bring in guest customers that only make one purchase is definitely not the best use of your time.
The reason guest customers are worth so little compared to your loyal community members is because they only make a single purchase, delivering all their value in one transaction. Meanwhile, community members come back again and again, increasing their customer lifetime value and your profits at the same time.
Reciprocal relationships are what separate one-time guests from devoted repeat purchasers.
As members of your rewards program, community members are consistently prompted to create reciprocal value for themselves and for your brand. Through the rewarding micro-actions you’ve set up, they deepen their relationship with your brand, reinforcing their decision to keep shopping with you.
Without the continuous giving and receiving of value from that relationship, guest customers will only ever be inclined to make a single purchase and leave, never to return.
Your brand needs to leave guest checkouts behind
Guest checkouts are like my dad going to Six Flags with my family: they get in but don’t experience any of the real value.
Without this experience, customers who checkout as guests negatively impact your brand community. They cost more to acquire than they’re worth, they don’t value the community you’ve built enough to engage with it or come back, and won’t tell anyone about what makes your brand special.
Your success as a brand relies on motivating customers to join, engage with, and share your awesome brand community with others. Without all three of these phases working together, your community growth and the value it brings your business won’t be able to grow.
By removing themselves from being part of your community at every stage of the cycle, guest checkouts make it clear that they don’t feel your brand is worth engaging with. So return the favor, and leave guest checkouts behind.