The COVID-19 crisis has undoubtedly shaken the world, disrupting lives for billions of people across the planet. Due to the lockdown situation we find ourselves in, the retail landscape is changing more rapidly than ever. Retailers are being forced to re-evaluate and adapt daily, with physical stores closing and the shift to digital and online being more important than ever.
While we don’t know when things will ‘normalise’, what we do know is that understanding customers and metrics around sales performance will be vital on the road to retail recovery. In our recent report ‘Fast-track upturn’, we explore the challenges retailers face and what they can be doing now to keep customer acquisition costs (CAC) low and Customer Lifetime Value (CLV) high while boosting propensity to purchase.
Traditional Customer Lifetime Value
We believe traditional CLV models are holding modern retailers back from realising their full potential and with customer behaviour increasingly unpredictable, it’s time for a rethink. To remain relevant today and in the future, retailers must consider a customer’s ‘propensity to spend’. An approach that recognises both the retailers’ and their partners’ investment across branding, marketing and customer experience.
New opportunities lie in strategic partnerships that enable retailers to ‘hack’ the acquisition process. It’s what we like to call the ‘Klarna Effect’. Via Klarna, retailers can meet 7 million UK shoppers – both instore and online – to accelerate growth. Our pre-engaged and already loyal customer base has a significantly lower acquisition cost – not only increasing sales, but stimulating a re-investment loop. In turn, retailers can focus the saved money on nurturing brand loyalty and advocacy.
Optimising spend: Learnings from today’s consumers, a survey of 2000 UK shoppers
So, what do we know about the psyche of today’s consumers? Where should retailers invest the money freed up from acquisition? Here’s a run down of some key insights we found:
- Emotional connection with your audience is critical– Building an emotional connection with your audience, something that many brands struggle to achieve, is now even more important for brands looking to retain customers and even acquire new ones. A third of consumers (33%) said that intelligent or humorous advertising would encourage them to visit a brand or retailer’s website or store. Two in five (39%) of those aged 16-34 said smart and funny advertising was the factor most likely to influence them when choosing where to spend.
- Word of mouth – Word of mouth has always been vital, but in the age of increased digital marketing spends, our research found just how powerful personal recommendations remain. Three in five (60%) say that when they love a brand or retailer, they’ll actively try and convert their friends. The factors that make consumers most likely to recommend a brand include an enjoyable in-store experience (16%), a good user experience across all devices and channels (15%) and a good returns process (14%).
- Customers want to be acquired –We found that retailers cannot become complacent with existing customers, otherwise they will migrate elsewhere. Two in five consumers (40%) say that they are loyal to a number of ‘loved brands’ they shop with to a certain extent, but only 3% say they wouldn’t shop elsewhere if they saw something they liked. Price remains king, with 58% of consumers saying that price plays a key role in deciding to use a new brand. However, flexible payment options are becoming increasingly important, with 18% of shoppers noting this would be a factor in trying out a new retailer.
- In-store experiences – When the world recovers from COVID-19 and retail stores begin to open, the role of in-store experiences will continue to play a key part in the future, especially when it comes to customer acquisition. 35% of consumers say that an enjoyable in-store experience would make them more likely to shop with a retailer, and 30% say that it would make them more likely to purchase more from them. Over a third also noted they would be more likely to shop with a brand or retailer that is associated with fun experiences.
As marketers re-formulate their strategic roadmaps and establish more accurate cost models, identifying new ways to maximise revenue will be vital to the upturn of their businesses. Our report details the growing importance of smart partnerships with trusted third parties. Such partnerships allow marketers to reap the rewards of pre-existing engaged customer segments and allow them to repurpose budget elsewhere.
Our hope is that elements of our report can help our retailers, and potential future partners, get back on their feet faster after COVID-19.
You can find out more and download the report here