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Losing Customers in Digital Space

AcxiomNovember 17, 2014

The other day, as a part of some research I was doing about retail loyalty marketing programs, I decided to get some real-life perspective from my teenage daughter about her favorite loyalty programs.  She proceeded to tell me about her favorite program where she follows an apparel retailer via Instagram and then receives flash sales alerts on a weekly basis.  This typically drives her to the website where she gets an update on all of the weekly sales which ultimately drivers her to the store.  For me, it served as another example of the variety of media options available to retailers to influence the behaviors of their customers.  Each of us now has countless similar examples.  These anecdotal examples serve as a glimpse of directions marketing may evolve over the coming years.

Retail marketers are focused on the changes that are reaching enough scale to present opportunities and warning signs that will drive changes in marketing strategies in the near future.  As we rapidly become submerged into another holiday shopping season, I am reminded of the significant increase retailers saw in traffic to their websites from smart devices, including open and click through rates from e-mails.   It provided a conclusive validation that smart devices would play a critical role in the future of marketing and it has led to an accelerated prioritization in smart device marketing methods.  Not only did it alert retailers to how their website content was being accessed but it was changing how consumers engaged in e-mail, search and social marketing. 

This focus on the dynamics of individual channels is very interesting to follow both reflectively and projecting into the future.  Across channels, there is increasing focus on multi-channel marketing and the accompanying measurement and attribution that is necessary to support it.

Amidst all of this, an important dynamic has emerged:  About one third of US consumers (and growing) are now digitally centric, no longer bound to traditional media channels and therefore not highly accessible through traditional media channels.  In other words, not only are they adopting these new digital channels, but they are now comprehensively abandoning the traditional ones at significant scale.

What do we mean by ‘digitally centric’?  For this purpose, we define it with these media consumption characteristics:  they don’t read newspapers, view very little traditional television, unlikely to read direct mail, don’t open promotional e-mails and they spend 3-4 hours per day online through various devices.  A few examples:

  • 32% of a leading bank’s customers are digitally centric and their direct mail and e-mail response rates are 57% lower than their other segments
  • Almost 30% of specialty retailer’s customers are digitally centric and are 60% less likely to even provide an e-mail address
  • 40% of a beauty product manufacturer’s customers are digitally centric and only 6% opened even one of the average of 40 e-mails they received last year.

Further investigation tells us that these customers span across all lifecycle stages and thus solving for this level of shift becomes a marketing imperative for a retailer who doesn’t want to lose one-third of their best customers and best trending customers.

What are the solutions?  Many retail marketers have been slow to expand out of direct mail, e-mail and paid search marketing and they must accelerate their attention into desktop display, mobile display, social and more.  For those retailers that have been leading the way in adopting emerging digital channels, it is a challenge of focus and optimization.  They must begin to more fully incorporate media consumption habits into their segmentation strategies and adjust their media mix strategies accordingly.  This focus will lead to eliminating wasted spend in channels where customer engagement is highly unprofitable and turn attention to ensuring reach and relevant engagement to the same segments in channels where engagement rates are high and growing.

In summary, we no longer live in a world where every consumer has a base set of channels such as TV, newspaper and direct mail that a marketer can feel comfortable that they will achieve consistent reach.  For some consumers, the digital channels are not add-ons, but instead the center of their media world.  As engagement channels continue to proliferate and consumers adapt and grow their digital consumption habits, marketers are now entering a world where finding the customer will be a challenge equal to the one of understanding what they want to buy and how much they are willing to pay for it.