By Emma Sahota, Managing Director, Astound Commerce UK
We are in unfamiliar territory. While the individual features of the landscape are familiar—inflation, rising prices, low consumer confidence, and shifting work patterns—never before have they all come at once. The result? Unusual and changing behaviour by customers right across their shopping journeys.
At the same time, consumers with less disposable income nevertheless have more choices than ever in terms of products and channels through which to buy. This presents an immediate challenge to brands trying to get and keep customer attention, yet it is also an opportunity for brands to develop their presence in these new channels. For example, M&S saw 1.2 million new customers and £100 million worth of orders from third-party brands in the first year since launching its marketplace offering. The same threats and opportunities come with social media, where shoppable features have accelerated dramatically in the last two years.
The picture is further complicated by a change in shoppers’ behaviours with a mix of elements that will be different for each persona, making it more complicated for retailers and brands to curate and influence the journey. To outright purchase, consumers are adding resale and rental in response to increased social consciousness, as well as their need to manage their costs and spending in a period of economic uncertainty.
The need to manage their costs is one factor fuelling the growth of direct-to-consumer (D2C) and cross-border commerce. For example, research from Yotpo shows 58 percent of shoppers worldwide buy from D2C stores because they believe the prices are more competitive, meaning more shoppers are likely to migrate to D2C brands as the cost-of-living increases.
The compulsion to rise to these challenges and opportunities to retain customers and build loyalty is supported by the facts. Yotpo research shows 93 percent of consumers are more likely to make repeat purchases at companies with excellent customer service and a report from Khoros shows 82 percent of shoppers are more inclined to be loyal to a brand whose values align with theirs. According to Emarsys, on average loyal customers will spend 67 percent more on products and services than new customers.
As a result, brands that are shifting their focus to cost-effective retention strategies will need to focus on data, loyalty programmes, customer data platform (CDP) optimisation, and personalisation. These four elements are bound together to achieve a single goal—greater retention to engender deeper loyalty, which enables brands to raise spend per customer while at the same time managing their costs.
The inputs should be dominated by first-party data that brands can own and secure. First-party data is more authentic than third-party data because it is personalised, secure, and circular rather than one-way. Customers will freely provide their personal information as long as they feel they are getting value back from the business. Our research shows that 80 percent of buyers are more likely to make a purchase when brands offer personalised experiences, while Salesforce finds that there is a 6 percent average uplift in average order value due to personalisation.
So precious is this data that it must be managed through a dedicated CDP, a resource not just for the benefit of brands but also for customers who want to know how their data is being used. However, they will reward brands they like with their personal data, further proof that personalisation helps cement loyalty.
The CDP builds complete and accurate profiles for insight analysis and granular segment building based on orders, behaviours, custom attributes, calculated insights, and other intent data. Once data is unified in the CDP, insights are derived, and segments are built from the unified datasets. The results are 30x faster segmentation, an increase in click-through rates (CTRs) across email campaigns, and tangible ROI within six months to a year.
The biggest trend in CDPs right now is optimisation as brands look for even greater returns from their platforms by launching or reinvigorating their loyalty programmes, perhaps by adding a subscription element, in recognition of just how valuable CDPs are. Brands are also looking to strip out anomalies in current data and create purer content that will perform better. Initiatives also include conversion rate optimisation (CRO), either by trading tactics with each other or using testing on returning users to see what performs best.
Studies show that it is 5x easier to retain a customer than acquire a new one. Loyal customers also spend more (on average) than new customers, making them an extremely lucrative demographic. The impulse for brands to act is right there, particularly in the current climate. Getting there soonest will, in part, depend on working with partners that have the growth expertise and the experienced resources honed from years of working with successful brands whose thirst for success is never quenched.