When it comes to investing in ecommerce growth, what comes first? The customers we have, or those we don’t?
Darren takes a deep breath and dives into online retailers’ investment plans for 2012 - where will the money will be spent and why.
Our partners at Eccomplished
recently launched research identifying a recession-busting sense of optimism amongst online retailers – 62% of retailers expect their online operations to grow by more than 10% this year. You can read more on this from Steve Rivers, Managing Director at Intelligent Reach
and another of our partners at Eccomplished here
So retailers are expecting and planning for growth, but how do they plan to deliver? By engaging more effectively with existing customers, finding new ones, or both?
Even in a mature online retail marketplace, established behaviours continue to be disrupted by new channels and devices, and competition for attention and market share is fiercer than ever. Clearly, retailers are responding to the new demands of increasingly connected consumers.
But while these retailers intend to concentrate investments on consumer acquisition and retention, they’ve not yet taken full advantage of the ability to leverage analytics and performance optimisation to drive high life time value consumers. For example, I believe that personalisation in the online grocery arena will explode over the next 1-2 years. Current growth in this category has been driven solely by consumers "finding their way" in the online space and multi-channel retailers just meeting demand. Be prepared for hyper-drive as online grocers accelerate personalisation to target highly relevant recommendations, promotions, and advertisements that foster customer retention.Customer retention vs acquisition
Three quarters (74%) of online retailers are investing in customer loyalty and retention, a priority that reflects the relative maturity of the online retail market. Within core markets, there remain only a few untapped consumer segments, making retention and loyalty critical.
But, and it’s a big but, diving into CRM, hiring email vendors and services and deep segmentation make for an expensive hobby. And with some verticals – think consumer electronics - you only buy a TV once every three years, so beware. This priority must be balanced with a sustained focus on increasing range; internationalisation and grabbing more market share.
While focusing on growing revenues from existing customers is relatively ‘safe,’ many retailers are failing in this area. Email done badly turns customers off faster than it generates business. ‘Group-off’ anyone?
Behaviours need to be tracked and understood, and the insight gathered fed back into targeted customer communications, promotions and offers that stack up well (in terms of investment risk) against the uncertainties of targeting new customers, channels and markets. Look at the spend on advertising and acquisition from John Lewis and Marks & Spencer at Christmas just gone – clear reminders that each shopper is a target and the on-going life-time value is still worth the effort. Given the economic backdrop, it’s no great surprise to see retailers of all shapes and sizes taking a similar approach; small and large are investing in this area. Customer acquisition
A significant majority of online retailers will also seek growth through investment in customer acquisition, principally by entering new international markets (60%) and by introducing new channels to market (67%).
We are seeing a particular emphasis on targeting competitor’s customer bases and increasing range. Department stores in particular - and many other verticals - are now competing headlong with Amazon and eBay. Previous research from Eccomplished showed 53% of shopping is done on marketplaces today, making marketplaces both a competitor and a partner.
This may well by viewed by those who control the purse strings as ‘low hanging fruit’ when it comes to driving revenue. But in reality these should be seen as essential long-term investments as well as short-term growth drivers. In addition, cost-effective implementation may be expected to deliver a lower cost per acquisition than competing for new customers in existing markets – where any hard-won gains are likely to be marginal and drawn from a base of consumers less likely to convert into loyal customers. Understanding and reacting to emerging behaviours
It is not a stretch to suggest that both these investments are linked to significant plans to invest in analytics and performance optimisation - 65% of online retailers will invest in this area in 2012.
Understanding customer behaviour plays a critical role in shaping acquisition or retention strategies, measuring their success and adapting as necessary. Any other approach is akin to working in the dark. Because this is resource intensive, getting the data right and then servicing it is becoming an increasing concern. ‘What is the return on investment on big data analytics?’ is a question we hear a lot.
, we have been talking a lot about the importance of “respecting the shopper”. Yes, learn about them, and tailor your offerings to them, but do so in a way that is respectful of them as individuals. Recognise them, appreciate them and customise your offers to their behaviour in a way that will resonate.
Equally, the fact that consumer behaviour is changing, driven by social media, mobile commerce and touch devices, has not passed retailers by. Investment in deeper, more detailed analytics will enable retailers to track macro-changes in behaviour more closely, react more quickly and shape longer term strategies based on real insight.
Finally, spending on analytics is also part and parcel of any decision to invest in international expansion and new channels – again, it’s about measuring performance and adapting everything from content to promotions and marketing as required.
But the battleground of the next 36 months will be using analytics to attribute success across multiple touch-points. This emerged as the number one focus for three quarter’s of UK retailers and one we are looking forward to exploring further.
Watch this space…This article is based on the Online Retail Innovation Index – an original research programme commissioned by Eccomplished and carried out by Coleman Parkes Research. All findings are based on detailed interviews with 100 decision makers in online retail, drawn from a sample of retailers with online revenues exceeding £3m.
Survey source: 100 detailed interviews were undertaken for this important survey – the first of the Innovation Index series. Only UK based companies with more than £3 million annual online revenues were included in the survey. Respondents were eCommerce Directors and Heads of eCommerce within the sampled organisations. All interviews were undertaken on the telephone using an agreed set of questions. MRS Code of Conduct rules regarding respondent and client confidentiality and anonymity were respected throughout.
Eccomplished is a free resource for online retailers, providing research and insight into how online consumers are behaving and retailers responding. Eccomplished is run on behalf of its members, leading ecommerce experts including RichRelevance, Intelligent Reach (formerly Ultimate Feed) and SaleCycle. Eccomplished.com
RichRelevance powers personalisation for some of the world’s largest and most innovative brands and retailers, deepening shopper engagement, increasing conversion and fostering brand loyalty.Customers include including Dixons, M&S and Ann Summers.
Established by the personalisation pioneers at Amazon, Rich Relevance helps increase sales, while respecting the shopper and surfacing only the most relevant products, content, offers and advertising.
Visit RichRelevance for further information here
For further information please contact Emily Cotton email@example.com or Stephen Millard firstname.lastname@example.org