Retailers are increasingly challenged by growing competition, low margins and the need to meet consumer demands for both experience and supply chain efficiency. What differentiates top performers is the ability to identify and embrace revenue-driving strategies across their organisations.
Sailthru’s study with Forbes Insights explores global retail and publishing brands’ approaches to customer strategies. The study reveals the growing divide between retail leaders and stagnant performers.
Prioritising short-term growth puts revenue at risk. Off-trend weather patterns and geopolitical events are just two examples of the factors out of the High Street’s control which can significantly impact sales, especially for those retailers focused primarily on new customer acquisition and short-term conversion strategies. To identify how high performing retailers approach customer strategy development, management, resourcing and execution related to both acquisition and retention, Sailthru commissioned Forbes Insights to perform a global study of 300 executives from enterprise and mid-market organisations.
The impact of retention is the most compelling trend discovered by the study. Retention-focused organisations grow faster. They are far more likely to make data-driven decisions, far less likely to have increases in customer churn, and, fascinatingly, they often also over-perform against their acquisition goals. Organisations which have increased investments in retention over the last three years had a 3x higher likelihood of significantly increasing market share vis-a-vis those which instead prioritised increases in new customer acquisition investments.
Retention is not purely a marketing focus. According to the study, management teams at companies spending more on retention are twice as likely to understand the impact of customer lifetime value on revenue and growth (and to plan accordingly). Furthermore, companies focused on retention are nearly 50% more likely to consider projected long-term profitability growth when making decisions about customer strategy. This long-term focus allows retailers to be confident and comfortable in prioritising initiatives and investments known for delivering sustained results, such as personalisation cross-channel coordination.
Strategies for success
It takes more than focus to translate strategy into success. Retailers must execute to realise potential returns. The research demonstrated that retention-focused retailers are far less likely to view personalisation and cross-channel initiatives as barriers to driving repeat purchases, even if they require some upfront investment. Tactics that modern retailers are prioritising include:
Individualised experiences
Top performers know that personalisation is far more than simply inserting your customer’s name in email. Leaders are connecting email, web and mobile experiences for every individual customer by using modern data structures and technologies that enable automated, scalable approaches. What each consumer experiences should be consistent and informed by their actions in all channels, but unique from consumer to consumer. Cross-channel campaign coordination is no longer enough. Cross-channel personalisation needs to be on your roadmap.
Optimised acquisition
The study found that for organisations focused on retention rate, their performance against both their retention and acquisition goals was above expectations. Leading retailers are using retention data to optimise acquisition through the use of predictive segmentation. Rather than relying solely on historical purchase data to identify top customers, retailers are predicting who their top customers will be based on propensity to purchase, predicted revenue and other factors (influenced by historical models, of course). These marketers then build lookalike models in channels such as Facebook to acquire new customers. This type of informed acquisition approach can decrease new customer acquisition costs by as much as 45%, and better yet, can yield increases in predicted customer lifetime value of more than 50%.
Data science driven email
For retailers, email delivers higher ROI than any other channel. The most forward-looking brands are refocusing on this channel and are taking advantage of technology advances to further increase its impact. By using data science to automate personalised product recommendations, send time and the type of campaign or message delivered to each individual, retailers are increasing total email revenue by 71%, reducing email subscriber churn by 72% and increasing the value of their customer file by up to 175%.
The time is now
As the research confirms, the connection between retention and revenue is undeniable – and those retailers focusing on developing high-quality customers have discovered a more efficient way to reach sales and revenues goals than exclusively targeting new customers.
For retailers who have yet to begin reprioritising investments, it is imperative to begin your exploration. While retention-focused organisations are significantly increasing market share, there is still tremendous room for even them to improve.
By Cassie Lancellotti-Young, European vice president of customer success at Sailthru
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