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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

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2019 BENCHMARK REPORT: CUSTOMER ACQUISITION

AND RETENTION

SURVEY REPORT

RETAILERS SHIFT

Strategies TO CATCH UP WITH

CHANGING SHOPPERS

RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

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Intro: Retailers Shift Strategies To Catch Up With Changing Shoppers ................................................................................................................................

Social And Email Lead Acquisition Strategies, But In-Store Interactions, Traditional Ads Still Play Roles.................................................................

Content, Events Claim Bigger Share Of Acquisition Budgets.....................................................................................................................................................

Only 28% Of Retailers Have A Mobile Acquisition Strategy In Place......................................................................................................................................

Retailers Still Rely On Discounts To Retain Customers, But In-Store Relationships Continue To Matter ..................................................................

Retailers Are More Efficient At Retaining Shoppers Despite Lower Marketing Spend.....................................................................................................

Low-Price Competitors, Marketplaces Present Top Shopper Retention Challenges ........................................................................................................

Subscription Still Has Room For Growth; 59% Of Shoppers Keep A Subscription For 6 Months Or More...............................................................

Measuring Customer Lifetime Value Is Still No Easy Task ...........................................................................................................................................................

Top Takeaways For Investing In Customer Acquisition And Retention ..................................................................................................................................

About Retail TouchPoints.........................................................................................................................................................................................................................

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Table of Contents

RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

Retailers are at an impasse today — they feel plenty of pressure to attract as many new consumers as possible to generate more traffic and sales, but they also have an equally important task — ensuring that these shoppers will return again and again after their initial purchase. Merchants are discovering that strategies for both customer acquisition and retention should complement rather than compete with one another.

One way retailers have traditionally found a balance between these competing claims is through loyalty programs: 52% of retailers offer a loyalty program today, with another 12% planning to implement one. These programs have proven effective: 44% of retailers say at least 40% of total revenue comes from loyalty program members. But retailers are discovering that there are numerous other options they can use to gain a more dedicated following, such as in-store events, content or subscription services.

The second annual Retail TouchPoints Customer Acquisition and Retention Benchmark Report is based on a survey of 109 retail executives. The responses provide insights about the newest trends, business models and technologies impacting how retailers gain and retain shoppers, as well as which traditional strategies and

solutions are still proving successful in today’s rapidly changing landscape.

The survey results reveal mobile’s increasing influence on acquisition strategies and highlights the necessity of rock solid in-store experiences to strengthen retailer- consumer relationships, while also covering the growth of subscription retail and the barriers retailers face in retaining shoppers.

The RTP editorial team hopes that retailers of all sizes can learn from this survey, to gain the knowledge required to build on their customer acquisition and retention strategies and to succeed headed into 2020.

Glenn Taylor

Senior Editor, Retail TouchPoints

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

Retailers work to attract new shoppers at every point of the shopper journey, with digital tools such as social networks (74%) and email (69%) as their top outreach strategies. Additional acquisition drivers include paid online search (48%), organic search (48%) and online display advertising (44%).

The first non-digital acquisition strategy to make the list is in-store interactions with associates (40%), with traditional strategies such as TV, direct mail, radio and outdoor advertising at 39%. One DTC retailer, Touch of Modern, actually boosted revenue by $50 million with the help of TV ad spending in 2018, showing that getting out in front of the consumer as they watch TV still matters.

“Not only did that perform well for us, it also opened up a whole new channel for us, at a volume that was comparable and larger than marketing on the web,” said Jerry Hum, CEO and Co-Founder of Touch of Modern in an interview with Retail TouchPoints. “It alleviated the pressure on the existing channels as well. We actually just pushed a new TV spot that first aired in October [2018].”

Many marketers are capitalizing on retail’s biggest growth opportunity, mobile: 31% say they use mobile ads to acquire customers. Up to 28% of retailers attract shoppers with two methods new to this year’s survey: content to draw shoppers in with blogs, e-Books, guides and videos; and location-specific information on the web site/mobile app.

Social And Email Lead Acquisition Strategies, But In-Store Interactions, Traditional Ads Still Play Roles

Which tools do you use to acquire customers? (Check all that apply)

Social networks

Email

Paid online search

Organic search

Organic display advertising

In-store interactions with associates (e.g. at the POS)

Traditional media (TV, direct mail, radio, outdoor advertising)

Mobile ads

Content (blogs/e-Books/guides/videos)

Location-specific information on web site/mobile app

Referral marketing

Events Affiliate marketing

74%

69%

48%

48%

44%

40%

39%

31%

28%

28%

28%

27% 22%

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

53+9+38

There are signs that marketers are shifting budgets to newer acquisition strategies, such as content (28%) and events (27%). For example, 62% of retailers said they used online display ads in 2018, well ahead of the 44% that leveraged them this year. And while 60% said they used paid online search last year, that number dipped to 48% in 2019.

Affiliate marketing also saw a drop in popularity, suffering a 16-percentage-point dip — from 38% in 2018 to 22% in 2019. And while 25% of retailers used celebrity influencers and 20% used micro influencers in 2018, those numbers dipped to 14% and 15% respectively in 2019.

Overall, 53% of retailers have increased their customer acquisition budget over the past year, while 38% say it has remained the same. Like last year, the largest group of retailers (26%) spend 10% to 20% of their overall marketing budget on customer acquisition strategies, while 16% dedicate more than half their budget to this goal.

The biggest change is that while marketing budgets continue to increase overall, it appears that customer acquisition’s portion of those budgets has stayed the same or shrunk. While 16% of retailers devoted less than 10% of their marketing budget to customer acquisition in 2018, that number has since jumped to 25%.

Has your budget for customer acquisition increased, decreased or stayed the same during the past year?

What percentage of your marketing budget is devoted to customer acquisition?

53% Increased

9% Decreased

38% Remained the same

Less than 10%

10% to 20%

20% to 30%

30% to 40%

40% to 50%

More than 50%

25%

26%

19%

7%

7%

16%

Content, Events Claim Bigger Share Of Acquisition Budgets

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

28+50+22

Mobile continues to be the largest driver of online shopping growth, with mobile orders increasing 34% in Q1 2019, compared to 3% growth via desktop e-Commerce, according to the Salesforce Shopping Index. With shoppers carrying mobile devices everywhere they go, it’s more important than ever for retailers to make mobile strategies a priority.

However, many retailers are still trying to figure out their mobile-specific acquisition strategies: only 28% have one in place, and another 22% say they are planning to establish one, the Retail TouchPoints survey revealed. Nearly half still don’t have a

mobile strategy in place, and this lack is likely to put them at a disadvantage in 2020 and beyond.

For retailers that are mobile-prepared, they’re largely focused on delivering discounts that are exclusive to mobile shoppers; the 65% that do this significantly outnumber those using in-app advertising (45%), push notifications (42%) or even mobile- exclusive content (39%). These mobile-only discounts align closely with shopper desires: 67% of shoppers say they are likely to choose a retailer that offers mobile coupons over one that doesn’t offer them, according to a BRP survey.

Only 28% Of Retailers Have A Mobile Acquisition Strategy In Place

Does your company have a mobile- specific acquisition strategy?

Which tools/technologies are you using to acquire new mobile consumers?

(Check all that apply)

28% Yes

50% No

22% No, but planning to implement

Mobile-specific/only discounts

In-app advertising

Push notifications

Mobile-specific/only content

Location-specific information deployed on mobile site/app

Chatbots/Facebook Messenger

Progressive web apps (PWA)

Voice-activated technology

65%

45%

39%

29% 26%

10%

42%

35%

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

A Forrester Research report estimated that acquiring new customers can cost 5X more than retaining new customers, a statistic that has led many businesses to focus their efforts on keeping already loyal shoppers happy. This thesis has since been supported by numerous other reports; 90% of happy consumers are more likely to purchase again, and 93% were more likely to be repeat customers at companies with excellent customer service, according to HubSpot.

Naturally, retailers use a variety of techniques to ensure that shoppers keep coming back. Discounts still lead as the top customer retention tool (60%), ahead of in-store relationship building (54%), the Retail TouchPoints survey indicates. As in-store shopping gives way to online shopping, retailers are looking to find new ways to leverage customer data in the store. This could enable associates to recall a shopper’s name or last purchase, and enable them to cater to consumers on a more personal level than had been possible a few years ago.

Retailers Still Rely On Discounts To Retain Customers, But In-Store Relationships Continue To Matter

Has your budget for customer retention increased, decreased or stayed the same during the past year?

What percentage of your total revenue comes from referred customers?

45+8+47

30+22+17+22+9 45% Increased

8% Decreased

47% Remained the same

Under 5%

5% to 10%

10% to 15%

15% to 25%

More than 25%

30%

22%17%

22%

9%

What tools do you use to retain customers?

Purchase discounts

In-store relationship building (i.e. associate recalling name/last purchase)

Loyalty program points

Free shipping

Gift with purchase

Seeking customer’s input on new product design/development

Communities that develop conversations among shoppers

Personalized web site experiences based on prior visit/purchase

Expedited shipping

Donations/sustainability initiatives

VIP perks (e.g. early access to new products)

Celebrity/micro Influencers

Other

60%

54%

44%

44%

28%

27%

22%

21%

19%

18%

17%

10%

3%

Retailers are beginning to focus more attention on the post-purchase part of the shopper journey. “Thank customers for their purchases after the goods have arrived,” recommended Richard Shapiro, Founder and President of The Center For Client Retention, during a recent webinar. “Don’t just send them a confirmation order. Provide personalized promotions and offers, and periodically keep in touch through push notifications with meaningful messages. That shows the customer that the brand wants to do business with them and appreciates their business.”

Iris Nova tracks retention rates at its two The Drug Store locations, enabling the company to determine the optimal next step for bringing the consumer back. In a session at the 2019 Retail Innovation Conference, Iris Nova CEO Zak Normandin said: “Because we’re building a dataset around consumption behavior as it relates to our beverages, we know that if you come in and grab a bottle every week and then decide to stop, we can reach out to you [via mobile] and say: ‘We saw you’re not purchasing any more. Could you tell us why? And how can we make this a better experience for you?’”

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

Up to 45% of retailers increased their customer retention budget this year, but an even bigger chunk (47%) actually kept their budget the same as last year. This stasis is further reflected in the marketing budgets of these retailers, showing that the overall percentage of money allocated to customer retention has slipped.

While 23% of retailers in 2018 said they spent 30% to 40% of their marketing costs on customer retention, that number plummeted to less than 5% this year. On the other hand, the two lowest percentage brackets — less than 10% of marketing spend and 10% to 20% of marketing spend — both grew, from 19% to 26% and 23% to 25% respectively.

Regardless of spending, retailers are slowly but surely getting better at turning newly acquired shoppers into repeat purchasers. While 14% of retailers said that more than half of new customers were converted last year, that number jumped to 17% in 2019. Improvements weren’t limited to only the top retention performers; the retailers that converted 30% to 40% of shoppers into repeat purchasers jumped from 12% to 17%, while the number that got 40% to 50% to buy again climbed from 12% to 18%.

Retailers Are More Efficient At Retaining Shoppers Despite Lower Marketing Spend

What percentage of newly acquired customers are you able to turn into repeat purchasers?

What percentage of your marketing budget is devoted to customer retention?

Less than 10%

10% to 20%

20% to 30%

30% to 40%

40% to 50%

More than 50%

26%

35%

19%

5%

12%

4% 10+22+16+17+18+17 Less than 10%

10% to 20%

20% to 30%

30% to 40%

40% to 50%

More than 50%

9%

22%

16% 17%

18%

17%

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

The improvements in retention rates arrive in the face of major challenges. More than half (51%) of retailers cite competition from lower-price competitors, and 44% of retailers attribute the loss of subsequent sales to marketplaces like Amazon. It’s worth noting that these two concerns have grown compared to last year, when 44% were worried about low-price competitors and 36% were intimidated by marketplaces.

When a retailer doesn’t win in a price competition, it simply has to make up the difference in experiences that keep shoppers from going to these low-price options.

“When most people talk about customer experience, they might be talking about a specific interaction, whether it’s on one channel or another,” Shapiro said. “But to me, as well as many others, the customer experience starts with that first interaction with

the company and should never end. When someone walks into a physical store, buys a product on e-Commerce, or engages with a mobile device, the experience is paused. When you think of a play vs. pause button on your phone, it’s critical that a brand thinks of a way to reboot that customer experience — to press play after it’s been stopped. This makes the customer feel wanted.”

On a positive note, retailers appear to be making progress in addressing internal barriers to customer retention. While 49% of retailers saw long purchase cycles for products as a top retention challenge in 2018, that number dropped significantly, to 32% this year. Also, fewer retailers in 2019 struggle with a lack of customer contact information for retargeting: 31% in 2019 compared to 35% last year.

What are your biggest challenges in driving repeat purchases? (Check all that apply)

Competition from lower-price competitors Losing subsequent sales to marketplaces like Amazon

Long purchase cycles for products Lack of customer contact information for retargeting

Don’t have a full grasp of individual customer data

Insufficient budget for retargeting Other (specified as shipping costs/time and confusion on the justification of ROI costs)

51% 44% 32% 31%

30% 14% 2%

Low-Price Competitors, Marketplaces Present Top Shopper Retention Challenges

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

Subscription-based retail can serve as a powerful tool to retain customers, by providing shoppers with a different set of products every month and potentially introducing consumers to new merchandise. In fact, retailers report greater revenue (67%) and greater profitability (61%) after launching subscription services, according to a survey by NAPCO Research.

The average customer spends 60% more in the six months following enrollment into a recurring program, according to Ordergroove’s subscription study.

Yet across the industry, the Retail TouchPoints survey reveals that there is still room for growth within subscription retail, as only 25% of retailers offer a subscription

model within their business. Nearly 60% of shoppers maintain subscriptions for at least six months.

However, more retailers appear to be warming up to the model — in the past three months, Urban Outfitters announced a women’s apparel subscription box program, Schick parent Edgewell Personal Care acquired Harry’s for $1.37 billion, and Walmart is testing a grocery subscription delivery service and has added KIDBOX-branded styleboxes to its web site.

Subscription Still Has Room For Growth; 59% Of Shoppers Keep A Subscription For 6 Months Or More

On average, how long do shoppers typically maintain a subscription they sign up for?

What percentage of your customers have used your subscription offering?

7+41+7+19+26 Less than 5%

5% to 10%

10% to 15%

15% to 25%

More than 25%

7%

41%

7%

19%

26%

Less than one month

One month to two months

Two months to six months

Six months to one year

More than one year

0%

22%

19%

26%

33%

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

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The term Customer Lifetime Value (CLV) is frequently thrown around as a way for businesses to assess the revenue a potential consumer can generate over the course of their entire relationship with a company. But CLV isn’t yet a consistent, agreed-upon metric in the way that a Net Promoter Score (NPS) is, because companies typically calculate it using their own parameters.

In fact, slightly fewer retailers are using — or have plans to use — CLV as a metric to calculate how much they should financially invest in customer retention efforts, showing that retailers still have trouble measuring long-term success. The percentage of retailers that say they don’t presently use CLV jumped from 41% last year to 48% in 2019.

One problem is that there are still too many metrics used to define CLV, with the top factor being types of products purchased, at 63%. On the surface, this makes sense — consumers who keep coming back to a retailer are likely to have a certain product they may have bought early on that they are highly satisfied with. However, this measurement doesn’t sufficiently account for variations in product lifecycle, which will be shorter for a piece of apparel than it would be for a major appliance.

Beyond product choices, there’s heavy variance among the CLV metrics retailers prefer, particularly when it comes down to consumer demographics (52%), social media activity (31%), email open rates (30%) and shopping habits that cover a specific time of day or day of the week (29%).

This excess of data may actually be detrimental to retailers that don’t have proper data management solutions in place, which would allow them to collect shopper information, sort it and interpret it efficiently.

While fewer retailers seem to have a grasp of CLV, that number drops even further when taking multi-touch attribution into account. While the 2018 Retail TouchPoints survey revealed 27% of retailers used multi-touch attribution to measure customer value, only 20% of merchants are taking advantage of these models this year. To make matters worse, 38% flat out say they don’t measure attribution in 2019, 12 percentage points higher than the 26% that said they didn’t measure attribution last year.

Beyond recency, frequency and spend, which metrics do you use to define Customer Lifetime Value (CLV)?

Do you use CLV to calculate your financial investment in retention efforts?

Do you use multi-touch attribution models to measure customer value?

Measuring Customer Lifetime Value Is Still No Easy Task

24% Yes

48% No

28% No, but planning to

20% Yes

22% No, we just focus on last-touch attribution

38% No, we are not measuring attribution

20% No, but we are planning to

Type of products purchased

Customer demographics (e.g. age, gender, income level)

Social media activity

Email open rates

Time of day/day of week shopping habits

Acquisition channel/method

Referrals/customer advocacy (e.g. on social media)

Web site dwell time

63%

52%

31%

30%

29%

26%

22%

16% 11

(Check all that apply)

RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

Nailing down the customer acquisition and retention efforts that work for a retailer’s particular business model will have to become more commonplace in this hypercompetitive retail environment, where consumers have virtually every purchasing option at their disposal. In the wake of Amazon Prime Day, perhaps one of the biggest recent examples of customer acquisition and retention success, retailers are now being forced to make significant investments in how they approach marketing, merchandising and data analysis, all while rethinking what it takes to gain and retain a “loyal” shopper.

Key takeaways from the second annual Retail TouchPoints Customer Acquisition and Retention Benchmark Survey include:

• Social and email continue to be top acquisition strategies, but retailers shouldn’t neglect in-store interactions or traditional advertising venues across TV and direct mail to get the word out about their business;

• Retailers appear more apt to spend heavily on customer acquisition than customer retention;

• Mobile-specific acquisition strategies are growing as the audience does, whether through mobile ads or exclusive discounts, and will continue;

• More retailers maintained their customer retention budgets than increased them in 2019, but they are retaining more consumers than they did in 2018;

• Only 25% of retailers offer subscription-based models, but 60% of shoppers stay with a subscription for at least six months, presenting a major opportunity to offer exclusives on new merchandise; and

• Measurement of CLV and multi-touch attribution has actually gotten tougher for retailers as the variances among shopping channels/habits continues to increase. Retailers must streamline their data management capabilities and pinpoint exactly who their most valuable consumers are if they want to understand these metrics better, and use them to both acquire and retain these shoppers.

Top Takeaways For Investing In Customer Acquisition And Retention

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RETAIL TOUCHPOINTS BENCHMARK REPORT: RETAILERS SHIF T STRATEGIES TO CATCH UP WITH CHANGING SHOPPERS

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Retail TouchPoints is an online publishing network for retail executives, with content focused on optimizing the customer experience across all channels. The Retail TouchPoints network is comprised of two weekly e-newsletters, special reports, web seminars, exclusive benchmark research, an insightful editorial blog, and a content-rich web site featuring daily news updates and multi-media interviews at www.retailtouchpoints.com. The Retail TouchPoints team also interacts with social media communities via Facebook, Twitter and LinkedIn.

P 201.257.8528 [email protected]

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ABOUT THE AUTHOR

Glenn Taylor, Senior Editor

Glenn Taylor is a retail journalist covering all aspects of the industry with interests tilted toward AI-driven personalization, conversational commerce and financial/business related news.

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