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Why you should invest in shopper retention

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Why you should invest in shopper retention

Think about the last app you uninstalled from your mobile phone. Why did you get rid of it? 

I’m not going to name names here but for me, it was a shopping app. I don’t like clutter in my life. I would thin out my closet on a regular basis, so I won’t have to face the fact that I cannot fit in my clothes from 10 years ago and it’s the same with my phone. Every once in a while, you’ll find me going through my contacts, my messages, photos, and you guessed it right, apps to free up space (I’m one of those people who use stacks to group apps and only have two screens in their phone.) 

How do I decide which apps to delete? Of course, based on my experience and what the app offers me. Sometimes their interface is so crowded, I cannot find what I’m looking for, like a finance app that made me go through a million steps just to make a simple wire transfer or interrupts my journey with never-ending pop-ups which, believe me, is the last thing I want to see when I’m trying to view my credit card spendings. Sometimes because I feel like the app’s content and offerings are totally irrelevant to me, like that shopping app which failed to show me the campaigns or that I would be interested in or products that fit my tastes. And sometimes because I cannot easily understand what it's all about. 

Enduring brand loyalty is a one-sided romance

Of course, I’m not the only one. Do you know what the average retention rates are these days? Well, just because I started off talking about mobile apps, let’s look at apps-specific data. 

The iOS App Store was launched with 500 apps in 2008. According to data.ai, in 2021 alone, 2 million new apps and games were released, bringing the total number to over 21 million and making the mobile ecosystem even more crowded. 

And an average person is spending approximately 5 hours on their mobile devices, again according to data.ai. Sounds a lot, except it’s not. Because mobile users actually access fewer than 20 apps per month but spend half of their time using a single app - mostly and unsurprisingly, social media apps. 

Unfortunately, long-lasting loyalty between customers and brands is often a one-sided romance. Data shows, the average retention rate is 25% on the day of installation. By day 30, that rate drops to 5.7%. That’s a big difference! Sadly, a quarter of newly downloaded apps are abandoned after their first use. It only takes 30 days for 97% of users to disappear forever. 

The reason why changes… A survey from CleverTap indicates the top reasons as not using the app, limited storage space, and too much advertising among others. 

There may be millions of apps out there but developing a good mobile app is no easy task. Similarly, user acquisition also requires a lot of thought and investment. And seeing that “killer app” you built with high hopes fading away must be painful. No one wants their months or years of work to go to waste in an instant. So, yes, you need to work hard on your relationship with your customers. And yes, shopper retention is vital to thrive (not just survive.)

Finding the right strategy matters but first definitions…

If you are here, looking for an answer about how to retain those hardly acquired customers, you probably already have a good idea about the difference between shopper acquisition and shopper retention but let’s start with a short description anyway.

As everybody does these days, I asked ChatGPT how it would define shopper acquisition, and here’s what I retrieved:

Shopper acquisition is the process of acquiring new shoppers for a business through various marketing and sales tactics. The goal is to attract and convert potential shoppers into actual paying shoppers to grow the business and increase revenue.

And as the term gives it away in the most obvious way, shopper retention is all about retaining your shoppers. 

Shopper retention refers to the ability of a business to keep its existing shoppers engaged, satisfied, and loyal over time. It is a critical aspect of any successful business strategy, as retaining shoppers is typically more cost-effective than acquiring new ones.

So, while shopper acquisition cost (CAC) measures how much is spent to acquire new users, shopper retention cost is all about how much investment is done to retain them. 

Don’t worry, I’m not going to bore you with definitions because I want to deep-dive into why shopper retention matters and why you should be prioritizing and investing in it. But it’s always good to have some background. 

“A poverty of attention…”

I’m sure you all have been hearing about the “attention economy” for some time now - a term coined by a famous psychologist, Herbert Simon, in the early 1970s. He suggested “a wealth of information creates a poverty of attention.” Yes, with the countless signals that surround us, attention is a scarce commodity today and every business, every brand, every influencer, every news outlet, every TV channel, every billboard, every website, every app is fighting to get their share of it. 

In such a competitive environment, acquiring new shoppers is difficult, naturally. It involves a lot of resources and time to identify the target audience, develop effective marketing strategies, create meaningful and compelling campaigns, and allocate the required budget. 

But retention is not easy either; it needs to be carefully handled. The lack of attention and the fierce competition make retention even more like an uphill battle and call for a robust plan.

Let’s talk about the costs…

Marketing is a fascinating field to work in (That’s what she said!), and with the capabilities we have at our fingertips today, it is an exciting time to be in this specialization. And that’s only when you have the budget to realize all the marvelous ideas you have. Justifying and getting the budget required to put a marketing plan into action is a major hurdle for marketers. Obviously, the cost of every single thing on that plan is a dealbreaker. Therefore, let's take a closer look at the costs of shopper acquisition and retention. 

To calculate the shopper acquisition cost, what you need to do is simple: Get the total of all the costs associated with acquiring shoppers during a given period including advertising, sales efforts, salaries of your team, and any other relevant expense you can think of. Then, divide it by the number of shoppers acquired during that period. Though it varies from industry to industry, the average acquisition costs are between 87 - 862 USD - with the lowest being online marketing and the highest being education, according to HockeyStack

Calculation of shopper acquisition cost: Total costs of acquiring shoppers divided by the number of new customers acquired.
Calculation of shopper acquisition cost

The calculation of shopper retention is also pretty similar. Again, you need to divide all the expenses related to retaining shoppers by the number of shoppers retained during a specific period of time. The expenses in this case would include the costs of shopper service, loyalty programs, special offers, and campaigns among others. It is quite difficult to share some numbers in this case as it really depends on the nature of each industry, product, or service. 

Calculation of shopper retention cost: Total costs of retaining shoppers divided by the number of shoppers retained.
Calculation of shopper retention cost

Which pays off more: finding new shoppers or keeping the old flames burning?

Now that you have the know-how, which one do you think would pay off? Which one creates the heavier burden on the marketing budgets? 

For obvious reasons, the cost of acquiring new users is higher than retaining existing ones.  Acquiring new shoppers means growth though it can be costly and time-consuming. You need to make sure you are targeting the right shoppers to make your investment worthwhile and also take engagement into consideration even in the acquisition phase. You can't target the right people if you don't know how users engage with your app after the acquisition. And let’s be honest here: If you cannot retain them and if they will just uninstall your app before the sun sets, what’s the use of all that money you spent to acquire millions of users. 

On the other hand, retaining existing shoppers is often more cost-effective and can lead to better ROI. Why? Because existing ones are more likely to make repeat purchases, bring in new shoppers through their reviews or word of mouth, and even share some valuable feedback that can inform your overall business strategy. What’s more, retaining shoppers also makes it possible to build a loyal customer base and improve your K-factor which is imperative for success in the long run. 

While striking a fine balance between both would ensure the sustainability of a business over time, there are other factors you need to take into consideration, such as your short- and long-term goals and the macroeconomic environment. 

The 2023 Customer Engagement Review published by Braze surveying 1,500 VP+ marketing executives across the world reveals, in 2022, 45% of brands spent more than half of their budget on retention - a wise move! And as you all know, following the recession-struck 2022, the new year got off to a shaky start as well. Combined with increasing user acquisition costs, that simply means one thing: Marketers need to be wise and creative with their spending this year and go with the most cost-effective strategies. (Apparently, there is a consensus on this because, according to the same report by Braze, “brands are focusing on retention in the face of economic instability” in 2023.) 

Invest in shopper retention now and reap the rewards later

So, what’s the next step? What are the things you should pay attention to and invest in? If you are ready, here you have some essentials.

Onboarding, a.k.a. the first impression

The very first impression about a person or an experience lasts well beyond that moment. For a mobile app, for instance, that would be the onboarding experience. This first encounter should be designed in a clear way so the shoppers will know exactly what to expect. One of the common mistakes is to design the onboarding process as a product tour that shows what every button in the app does. In fact, what the user should get out of an onboarding experience is what the app can do for them and how to make the best of it rather than just an “informing/educating” step from a long-term standpoint. Additionally, creating cohort-based onboarding is important to help the app stick. 

Personalization

We (human beings) love feeling valued and understood. And personalized experiences are how businesses can awaken that feeling in their customers because it makes you feel in control when you feel like what’s being offered to you is not something generic. Through the collection of zero-party data with interactive and gamified content and based on past actions, you can analyze the needs and preferences of your shoppers and deliver tailored experiences and offers. Our customers at Storyly often make use of our interactive stickers like quizzes, polls, and question stickers to learn more about their customers, and this enriches their audience segmentation efforts with reliable and actionable insights (even more reliable than first-party data because there is no guesswork in zero-party data.) (Actually, my teammate Deniz has created a wild guide with great personalization strategies, you should check it out.)

Fun factor

Shoppers need a reason why to return to your store, to your app, whatever it is. The ambiance of a location, the quality of the products, and the customer service among others all have an impact on the urge to come back. One other thing you can do is add a little bit of fun. Gamification is a great way of doing it. The interactive components I mentioned above are proven to be effective in creating gamified experiences. Here are some ideas on how to adopt this strategy. 

Timely re-engagement

Timely re-engagement is also another aspect that marketers should make note of. It should not take forever to re-engage with the user. You should be aware of the signals and ready to nudge them as soon as their engagement slows down. 

Reward loyalty

Loyalty, as I mentioned earlier, is a difficult currency to handle, it’s hard to gain and hard to retain. So, making your customers feel valued and appreciated for the time they spent with you matters. When rewarded, they are more likely to sustain their connection with a business and this can result in increased sales, higher customer lifetime value, and positive word-of-mouth referrals.

Collect feedback

Things might look different when you put on someone else’s shoes. It’s understandable that you can get a little blind to the sides of your products or services that can be developed. But you can always count on what your customers have to say about them. Believe me, they can guide you in a very deep way and even open up new horizons. 

Of course, these are not all and there are so many things you can do to boost your retention rates. In a previous blog post, we shared some examples, if you want to take a look at them. 

Long story short…

What I am trying to say with this 2100-word-long article, your relationship with your shoppers is a checking account. Starting from day 1, you are spending from your balance and if you do not continue your investments, your account will eventually become overdrawn, and your customers will leave you for a competitor who is willing to invest in building a stronger relationship with them. 

Just like a bank account, you need to consistently make deposits by offering excellent products or services, personalized experiences, and rewards for loyalty in order to keep shoppers engaged and satisfied. And that’s all I am going to say about it. 

ABOUT THE AUTHOR

Özge Akyel Celikelli

Content & Brand Marketing Strategist at Storyly. Technology and science enthusiast, avid reader of sci-fi and dystopian books. Describes herself as a curious being. Thinks, reads, and writes about strategic communications, branding, and sustainability.

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