Commentary

Trolling For Customers: Retailers Spend More For Acquisition Than Retention

The old belief in mail order was that you tried to acquire new customers in a strong economy, then worked your customer list during a weak one.

If that still holds true, the economy must be booming. Acquisition is now an investment priority for 81% of all ecommerce companies, according to How Leading Retailers And Direct-to-Consumer Brands Are Investing In Digital, a study by CommerceNext, sponsored by Oracle Customer Experience Cloud.

Retention/loyalty marketing is a priority by only 43%. That, presumably, is where transactional emails would fall.

Further down the list are brand optimization (26%) and mobile optimization (32%). Even lower are seamless omnichannel marketing (21%), unifying data to get a single view of the customer (20%) and personalization (19%).

This means companies are going all out to pull in new customers, without necessarily conducting due diligence on the data front. But the results differ by the type of business.

CommerceNext surveyed 100 executives, and conducted follow-up interviews with three.

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Overall, 65% are increasing their marketing budgets this year, and 25% are holding steady. Only 10% are lowering their spend.

Digital-first DTC companies, those that started out as pure ecommerce brands, are more bullish — almost 80% are spending more. And theyare allocating more of their total budgets to marketing than traditional retailers.

Among other things, DTC firms are much less inclined than traditional brands to have aging legacy systems (7% versus 41%).

However, 77% of the traditional players are budgeting more for acquisition, versus 70% of the DTC brands. That may not be a sign of confidence on the part of the former. 

Moreover, 70% of the DTC retailers are spending more on retention, versus 64% of the traditional companies.   

Otherwise, spending patterns seem to be based on results. Of those polled, 24% exceeded their acquisition expectations last year, and 53% met them. Only 23% said they fell below the forecast. 

In contrast, only 13% exceeded their retention expectations, while 38% met them. But 42% were disappointed. 

This may have less to do with the economy than with the challenge of personalization. Indeed, 65% will boost their investments in customer data platforms, and 52% in personalization technology.

In another sign of change, 47% are spending more on alternative payment systems, whereas few are allocating dollars to voice-enabled search or virtual reality. 

Where does transactional email come in? It should not be sidelined in the budget.

Case in point: Hammock Gears pulled a 164% increase in Black Friday and Cyber Monday sales last year with a redesigned website and a more “granular approach to abandonment emails,” Retail Touchpoints reports. COO of Hammock Gear Sally Brown said the company took "a softer approach to it, adding that “rather than just going right at them and saying, ‘Hey, we know you stopped by, and we know you looked at this thing — come back and we’ll give you a discount,’ it's generally a courteous, ‘Hey, thanks for stopping by, we appreciate you.’”

Follow-up emails include a 10% discount offer. And newsletter signups get the same discount, although they haven’t yet purchased anything. 

4 comments about "Trolling For Customers: Retailers Spend More For Acquisition Than Retention".
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  1. Craig Mcdaniel from Sweepstakes Today LLC, May 31, 2019 at 5:43 p.m.

    Interesting article. I would add this, having published over 75,000 high quality sweepstakes, both retailers and manufactures use sweepstakes and promotions for both acquisition and retention. While some in the marketing still think that people only enter the sweeps for the prizes, this is not true. I have surveyed thousands over years this question and about 70 to 75 percent will most likely to buy from a company that offers a sweep in their marketing mix. Then another another 10 to 15 percent will consider the company because they know something about the companies product line. Followup email is an important part of the marketing process. 

  2. Paula Lynn from Who Else Unlimited, May 31, 2019 at 5:47 p.m.

    It is always more expensive to gain customers than to maintain customers. GDPR will see this through even more so and cramp the marketers who market for nothing for self profiteering by gathering and selling customer data. It can't come soon enough.

  3. Ron Kurtz from American Affluence Research Center, June 3, 2019 at 12:54 p.m.

    Is a sample of 100 for such a braod subject really sufficient to be meaninglul? Admittedly the data does seem consistent with conventional wisdom that marketers give too much attention to new customer acquisition and not enough attention to the retention and expansion of the business of the more profitable existing customers. 

  4. Michelle Barry from Mesmerize Consulting, June 4, 2019 at 6:20 p.m.

    For anyone interested in reading the full report: https://commercenext.com/research/. It's free to download.

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