It’s no secret that marketers within every industry, including retail, are under significant pressure to continually acquire new customers. This is especially true for retail marketers. In a new report from WBR Research, commissioned by SheerID, The State of Customer Acquisition, 150 digital marketers were surveyed across five sectors – retail, travel, financial services, consumer packaged goods, and food services – to better understand the pressures they are under as well as the channels and promotional tactics they’re using to acquire customers.
According to the survey, marketers within the travel and retail industries feel the most pressure, with 81 percent of retail marketers stating that they’re under more pressure to meet acquisition and revenue goals than they were one year ago. Respondents across all five industries indicated that “competitive differentiation” was the single biggest factor that caused them to feel the growing pressure. “Privacy concerns and/or privacy regulations” was the second most cited cause, followed by “rising customer acquisition costs.” Among those who stated that rising costs was a pressure point, half of them cited worries over rising acquisition costs from online and social advertising networks.
Is Mass Discounting Leading to Growing Pressures and Shrinking Margins?
Marketers across each of the five industries are relying heavily on universal discounting, with eight out of 10 indicating that promotions and discounts play a central role in their customer acquisition strategy. This fact is especially true for marketers within the travel and retail industries. Regarding the latter group, 75 percent of them are running either “weekly” or “continuous” discounts, with 69 percent believing that increasing the frequency of discounts and promotions helps to boost sales.
However, marketers are starting to re-examine their mass discounting ways. The majority of those surveyed believe that their mass discounting programs are preventing them from achieving higher conversion rates due to “consumer fatigue or conditioning to discounts,” “a lack of differentiation,” or “an inability to target a specific segment.” Moreover, almost two-thirds of respondents confessed a concern that running more discounts may be driving consumers to either expect discounts, devalue their brand, or cut into margins.
And yet, while marketers recognize the problems associated with mass discounting, more than half of them admitted that “nothing prevents me from running more promotions.” What’s clear from these responses is that retailers are conflicted and need another alternative that both protects their brand and incentivizes high-value customers to act.
Marketers Are Experimenting With New Channels and Gated Promotions
Understanding the limitations of mass discounting, marketers in all five sectors stated plans for finding new ways to acquire customers in 2019. Specifically, more than 70 percent are seeking ways to differentiate their brands via “new” marketing channels vs. utilizing existing ones (51 percent).
On the topic of discounting, 78 percent of retailers said they would try or use segment-specific, “gated offers.” Gated offers are exclusive promotions for individual groups such as active military, students or teachers. Unlike universal discounts, gated offers appeal to specific demographics. Because they're exclusive to the group, they see much higher conversion rates than a typical promotion and are commonly shared, creating a network effect within the target group which drives down the cost of acquisition significantly.
For instance, teachers are particularly loyal to retailers that offer teacher-only discounts. Earlier this year, Agile Education Marketing and SheerID conducted a national survey of teachers regarding their purchasing decisions. The results were striking: 84 percent of those surveyed said they would recommend to friends, family and other educators those retailers that offered teacher discounts. Moreover, 83 percent said they would choose a retailer that offered a teacher discount over one that didn’t.
This data regarding teachers jibes with research we’ve conducted of other groups such as active military and veterans. Regardless of the tribe, roughly eight out of 10 consumers stated they would shop with a retailer more often if presented with an offer that was truly exclusive to their particular group. We also know from our research that consumers who are offered a deal because of their commitment to a particular cause, life stage or professional field are made to feel special and honored by the brand.
As we move further into 2019, there’s little doubt that mass discounting will and should continue to be a part of retailers’ customer acquisition efforts. However, retailers would be wise to also use more targeted forms of discounting designed to gain the attention and loyalty of particularly coveted groups of consumers – ones geared to drive short-term profits and also boost the long-term reputation of the brand.
Jake Weatherly is the CEO of SheerID, a digital verification company for gated, exclusive offers.