UK retailers have faced a whirlwind of uncertainty over the last six months. The post-pandemic honeymoon period, through which consumer confidence returned and supply chain issues eased, has been firmly dampened by rising inflation. That said, the most recent figures from the British Retail Consortium showed the value of UK retail spending up 2.3%. Hardly surprising at a time of high inflation and surging costs, but still reasonably buoyant figures as we look towards the busiest period of the retail calendar.
During these particularly tough conditions for both business and consumer alike, many retailers may have the temptation to shut up shop and eschew from tactics that deviate from the “norm”. Maintaining the straight and narrow of steady investment in customer acquisition and cost cuts during retail holidays, provide a solid consensus strategy of how to approach the upcoming retail season. However, it is at times of consumer anxiety and increased economic uncertainty when new battlegrounds emerge. This is precisely the time where investment in customer experience matters most.
Retention: stretch the value of customer acquisition
Firstly, through periods of high inflation, retail businesses spend relatively more to acquire each new customer. Analysis from data sharing platform Varos recently found that alongside stretched revenues through the past quarter, the costs to acquire new customers through online advertising is now “significantly higher” than the same time last year. The overall ad spend being committed on major social media platforms is also “materially lower”, emphasising the issue of stretched resources when it comes to customer acquisition.
For many retailers, devoting resources to customer acquisition via online engagement channels is an unpreventable cost to doing business. Yet, that does not take away from the fact that higher quality customer experience can make this investment go further and prevent wasted resources attracting customers who will not come back.
The secret is retention, and that is something only embedded by ensuring customers have the best possible experiences when they do choose to order with a brand online. The last thing any retail brand should want is to devote resources and money to acquiring a customer, only to see them never return due to a poor delivery, return or order experience. The steps to mitigate against this risk are relatively simple, ranging from a personalised returns portal to consistent communication regarding an order and its status. What’s more, these features will ensure the resources devoted to attracting one customer, will not have to be spent again attracting another because of poor communication in the post-purchase process.
Loyalty: differentiating from your competitors
A second point in favour of prioritising customer experience through economic uncertainty is the longer-term loyalty value. If we think of retention as the willingness of a customer you have just acquired to come back, loyalty is the more elusive disposition they might feel to shop with a certain brand long term. Now make no mistake, loyalty is considerably more difficult to win over when inflation is at play. Consumers with stretched spending capacity are likely to make these choices based on price.
However, customer loyalty also comes with higher rewards and can only be won over through high quality experiences. Offering customers, a bespoke order process that is completely tailored to their needs, from the minute they consider a purchase to after the point of delivery, can be hugely beneficial in engendering loyalty.
What’s more, the technology exists to make good customer experience as simple as possible. It’s about providing complete transparency on the cost of an order upfront; the sustainability information numerous customers wish they had access to but often don’t; and ensuring information about returns and re-delivery is easy to access. It also means brands should actively seek to provide customers with information about products that is genuinely useful to them, rather than look to reengage them with the same marketing content every other potential customer receives.
These steps have the benefit of both being simple and cost-effective, yet many retail brands will see the stormy economic conditions ahead and jump quickly to slim down spending on the additional value they provide customers. It is through times of economic uncertainty that retailers should devote more time and energy to customer experience. The smart brands who adopt this approach will be rewards with retention and loyalty, which will hold the key to weathering the uncertainties of the future.