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    on April 09, 2019 Customer acquisition

    The state of customer acquisition in retail: 6 trends happening right now

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    Seventy-seven percent of digital marketers felt greater pressure to meet acquisition and revenue goals coming into 2019 than they did the year before, according to a survey by SheerID.

    This pressure isn’t a light one for marketers in retail, where many brands often look at customer acquisition as the holy grail -- the place where all other activities are supposed to lead.

    So, what are retail marketers facing? How are they attempting to push through the pressure and march toward acquisition goals? And what else are they thinking about in terms of acquisition?

    Here are six answers.

    Table of Contents

    1. 2019 brings continued industry pressures.

    2. Differentiation is key to customer acquisition.

    3. Customer acquisition costs are rising.

    4. Can smaller stores mean greater acquisition?

    5. Consumer expectations must be met to make acquisition count.

    6. Customer acquisition and retention remain in healthy tension.

    1. 2019 brings continued industry pressures.

    We’ve all heard the words: Retail apocalypse. But according to Yahoo Finance, it’s heating up in 2019.  

    Other outlets agree.

    As of mid-February, Coresight Research reported that retailers had already shut down 23 percent more stores than they did at the start of 2018.

    In late March, Moneywise said, by their count, “more than 5,000 store closings have already been announced in 2019, for this year and beyond.” Then headlines around consumer spending showing that the economy’s “slowing swiftly in the new year” hit news feeds, as we all learned that consumer spending missed its forecast.

    And by early April, Moneywise updated their article to show an additional 1,000 announced store closings, bringing the total for this year so far up to 6,000.

    These headlines are doing nothing to lessen the pressure retail marketers were already feeling around acquisition.


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    2. Differentiation is key to customer acquisition.

    The survey that found digital marketers were feeling higher pressure around customer acquisition coming into 2019 also dove into why. Its findings? The single biggest challenge respondents faced when acquiring new customers was competitive differentiation.”

    Being in a noisy marketplace is a huge part of this. Today, so many distractions can pull a consumer's attention in so many directions that it might be more difficult than ever to capture. Take the next sixty seconds alone. Here's a fraction of the online activity that will happen, thanks to PC Magazine

    • Facebook will have 1 million people logging in
    • YouTube will get 4.5 million videos viewed
    • Google will see 3.8 million search queries
    • Instagram will have 347,222 people scrolling it 
    • Giphy will serve up 4.8 million gifs

    The current state of branded content -- the key tool for many modern marketers -- doesn’t help either. According to one study by Beckon, only 5% of branded content garners 90% of consumer engagements. That means 19 out of 20 content pieces get little to no engagement. 

    So, how are retail marketers planning on cutting through the noise and progressing toward acquisition goals?

    The SheerID survey found that 71% of digital marketers are looking for ways to differentiate through “new” marketing channels versus investing in existing ones in 2019.

    section 2 (1)

    Many retail marketers are also feeling the pressure of running more tests around hot topics like artificial intelligence, experiential retail or even attaching their brand to social causes. Let's dive briefly into each: 


    Artificial Intelligence (AI)

    There are all sorts of use cases out there for AI, which in its broadest sense, refers to intelligence demonstrated by machines.

    Among those use cases is the ability to transform customer acquisition in a noisy marketplace, according to VentureBeat: “Your message is too often drowned out by a hurricane of competing messages and your customer’s divided attention across a variety of channels, and it’s trickier than ever to track down most promising new customers. But AI is changing the game, letting you find and reach the right customers more quickly and more effectively than ever before."

    Aside from helping to pinpoint and bring in the right customers, AI also has been found to introduce retailers to new, qualified audiences they hadn't considered and to lower the cost of customer acquisition.

    And its use cases will only continue to grow. In fact, Gartner predicts that by 2020, 85 percent of customer interactions in retail will be managed by AI.



    There’s all kinds of data about the impact of being a purpose-driven brand. 

    • Nearly nine-in-10 (88%) Americans say they would buy a product from a purpose-driven company, and the majority would be willing to pay more.
    • Nearly two-thirds (63%) of surveyed global consumers prefer to purchase products and services from companies that stand for a purpose that reflects their own values and beliefs, and will avoid companies that don't.
    • The majority of consumers want brands to take a stand on social and political issues.

    Because it's still more common for retailers at large to not be purpose-driven than to stand for something, this one's a key differentiator today. The thing that can make purpose more difficult to try than something like AI, however, is that it can't just be a marketing play. In order for purpose-driven brands to acquire and retain loyal customers, their "purpose" must be authentic.

    H&M is an example of one well-known retail brand taking a stand. The retailer just announced that, by 2020, it will transition to 100% sustainable cotton. This is one piece of a larger plan to convert to 100% recycled or sustainable materials across the company's supply chain by 2030.


    Experiential Retail

    The verdict may still be out on the exact ROI of experiential retail, but it’s being called “table stakes” in major metropolitan areas. The idea centers around turning shopping into an experience -- and often one interlaced with technology. 

    Experiential retail has caught attention from big brands like Foot Locker, which plans to have concerts in its newest Detroit location; L’Occitane, which has a location where consumers can ride hot air balloons through virtual reality and "bike through Provence" using stationary bikes; and Walmart, which recently applied for a patent that details a "virtual show room."

    There are also smaller retailers focusing on experience, like one indie store in D.C. called Take Care, which is offering up co-working space in the back. Aside from store discounts, members get access to regular mini sessions of desk yoga, meditation cushions, an aromatherapy bar, complimentary local coffee and other perks. 

    Co-working, virtual reality and live entertainment are just a few of the ways retailers are playing with the experiential model, on their quest to find out where innovation can satisfy acquisition.



    3. Customer acquisition costs are rising.

    Retail marketers were expected to end last year with both digital and mobile ad spend up over the year prior. Data shows that alongside this growing ad spend, comes the growing cost of each retail marketing lead.

    In fact, when the SheerID survey asked digital marketers what’s causing that increased pressure around customer acquisition, the third greatest challenge was “rising costs” (landing behind “privacy concerns and/or privacy regulations"). About half of respondents specifically expressed concern over the rising acquisition costs from online and social advertising networks.

    Unfortunately, higher costs are not equating to high conversions. Retail marketers are seeing a 3 percent conversion from lead to customer, on average. This sets retail behind nine other industries, with nonprofit (at 2%) being the only one that retail is performing above.

    Moving forward, what warrants priority: more leads, or more conversions? This is one question retail marketers will need to continue exploring throughout the rest of 2019.



    4. Can smaller stores mean greater acquisition?

    Section 4-01

    What happens when you combine the rise in pressure around customer acquisition, with the higher lead cost, need for differentiation, and everything else going on in retail? In a piece for the The News Tribune, journalist Bill Virgin summed it up: “Thus it’s the era of great experimentation, as traditional retailers shake up not just their stores but their business models.”

    One way that they're shaking things up is by testing smaller brick-and-mortar locations.

    Of course, smaller stores could offer all sorts of benefits. But in terms of acquisition specifically, as CNN coverage explained, smaller stores could be a way for retailers to acquire new customers in areas like urban locations or college campuses where there's simply no room for bigger stores.  

    In mid-March, Target announced that it will open around 30 slimmed-down stores this year in cities like Los Angeles, New York and Washington, D.C. and on college campuses. Target CEO Brian Cornell specifically called out the opportunity this will give them to "enter new neighborhoods, where a full-size store wouldn't fit."

    Walmart, Kohl’s and Ikea have also made headlines for experimenting with smaller stores, among other retailers.



    5. Consumer expectations must be met to make acquisition count.

    Eighty-one percent of retail shoppers conduct online research before buying. Many of them can then move on to actually purchase whatever it is that they’re researching online, choosing to shop when and where they want. There’s so much empowerment that comes with being a consumer today.

    But, as we all know, the empowerment that comes from all of these shopping options creates challenges for retailers.

    In a USA Today piece, Daniel B. Kline wrote: “In some measure, the so-called retail apocalypse can be traced back to this explosion of options. Shoppers no longer have any need to put up with poor selection, a lack of in-store personnel, or poor omnichannel support at one retailer when so many other chains are doing those things right.”

    In other words, every consumer interaction, across every channel, is critical.

    A new BRP study backs this up: 63 percent of consumers said it only takes one unsatisfactory shopping experience to make them stop shopping a brand.


    The omnichannel part of this discussion is key. Because today, most consumers also expect consistent experiences across channels. (90% of consumers, to be exact.)

    But aside from the challenges that come with juggling multiple channels, more than half of marketers may not have the resources to really do this well; 64% of marketers cite lack of resources and investment as their top barrier to omnichannel marketing.


    On top of focusing on omnichannel strategies, retailers also continue to take a closer look at personalization, or doing what they can to personalize the entire shopping experience -- starting with acquisition.

    Again, personalization centers on meeting consumer expectations. Fifty-one percent of consumers expect that by 2020 companies will anticipate their needs and make relevant suggestions before they make contact.

    As consumer expectations continue to rise, retailers will need to continue finding ways to create high-quality, seamless and personalized interactions across channels. Then they can acquire new customers and get them to stick around.


    section 5 (1)

    6. Customer acquisition and retention remain in healthy tension.

    Second-time buyers are 130 percent more valuable, according to Bluecore. And we’ve all seen the data around how much more expensive it is to acquire a new customer than to keep a new one. Yet many retail marketing teams are still focusing on customer acquisition as their primary KPI.

    In an article that suggests the "second sale" is most important in retail, Chris H. Petersen, CEO of Integrated Marketing Solutions, explains that this continued focus on acquisition comes from retail marketing’s legacy. The industry has revolved around fast results. Plus, many retail marketers' tech stacks haven’t traditionally been set up to focus on the entire customer relationship.

    The same thing is common in B2B marketing, with many marketers still focusing on lead numbers over customer advocacy. Until marketers on either side have more capacity to experiment, or more buy-in on the topic, customer acquisition and retention will likely remain in healthy tension

    Of course, these six insights are only a handful of the things retail marketers are paying attention to around customer acquisition right now. Stay tuned to our blog for more.