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UK etailers focus on keeping existing customers rather than wooing new ones

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If it’s cheaper for to retain existing customers than to acquire new ones, then why not focus on keeping those you already have? Data from IMRG and Capgemini suggests online retailers are doing just that.

The analysis focuses on the active customer retention rate, which reached 36.4% between May and July 2016 – described as a record high. It means, say the two organisations, that the percentage of customers returning to shop again with a retailer was at its highest since they started tracking this metric in 2010. The percentage of first-time customers, meanwhile, was at a record low.

IMRG says the figure may reflect a more cautious approach from retailers in the period leading up to and including the EU Referendum. That’s because the costs associated with retaining customers are typically less than when acquiring new ones – which may, for example, involve bidding for expensive, high demand Google search terms.

At the same time the average selling price per item reached its lowest rate in over three years in this second quarter of the year, falling by 9% compared to the same period last year. IMRG says that suggests there was a lot of discounting over the quarter, which also featured Amazon Prime Day.

“The record high customer retention rate suggests a more conservative approach to how retailers are assigning their marketing budgets, and a number of factors may have influenced the fall in average selling price per item – disappointing weather in May and June, concerns over the referendum, Prime Day,” said Tina Spooner, chief information officer at IMRG . “Yet what’s interesting is that overall online retail sales growth performed well over this period (up +17% yoy), with July’s growth (+19%) the highest since November 2014. The average basket value that shoppers are checking out with – which may include multiple items – was also up, despite the fall in individual item prices. So ultimately, as unpredictable a period as we may now be in, this approach seems to have kept customers engaged overall so far.”

Bhavesh Unadkat, management consultant in retail customer engagement design at Capgemini : “It is great to see that the active customer retention rate has reached a record high of 36.4% during Q2, up from 33.7% in the previous quarter and five percentage points higher than the rate recorded in the same period last year. Retailers in the past have concentrated efforts on acquisition which usually comes at a higher cost than retention, so a focus on retention is great to see and I am sure retailers will reap the benefits of this.

“It isn’t just big-business retailers which are refocusing their efforts. We’re increasingly seeing smaller retailers in the news as a result of their increased focus on improving customer retention, through investment in new cloud technologies. Customer loyalty and retention has implications which reach every aspect of every business, and so we can expect to see retailers and other businesses alike continuing to rethink how they build both trust and consumer confidence in the coming months.”

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