Retailers Worry About Rising Customer Acquisition Costs as Paid Social KPIs Decline

By Marketing Charts

Retailers are dealing with a range of risks to their 2022 sales objectives, including supply-chain constraints and new waves of COVID. One of their biggest risks – and the most widely-cited by digital-first retailers – is the rising cost of customer acquisition, according to a report [download page] from CommerceNext.

A majority (57%) of the 118 retailers surveyed said that rising customer acquisition costs are a threat to their 2022 sales goals. It should be noted that those goals are quite bullish, with 55% expecting growth of at least 20%.

The concern with rising customer acquisition costs comes amid a disappointing performance from a heavily relied-upon channel: paid social. Indeed, about three-quarters of the respondents said that their KPIs in paid social have declined after the latest changes in iOS 14/15, and a strong majority are concerned with their KPI performance. This is after retailers had planned an increase in spending on paid social last year.

Nonetheless, retailers will stick with paid social this coming year for customer acquisition, according to the report. Among 8 investment allocations provided, a leading 78% placed paid social among their top 3 for customer acquisition this year, ahead of paid search (69%). Trailing were influencer marketing (46%) and affiliate/partner relationships (37%), with SEO (32%) rounding out the top 5.

When it comes to retention, email (87%), loyalty programs (62%) and SMS (56%) are the most likely to be among retailers’ top-3 budget allocations this year, ahead of customer-data management and content.

Loyalty programs in particular should get a closer look this year. Given the rise of privacy restrictions around 3rd-party tracking, about one-third said they will expand their loyalty awards program offers.

Retailers to Focus on Digital Marketing and On-Site Experience/Optimization

In order to reach their 2022 sales growth objectives, retailers will focus more on digital marketing (acquisition/retention) than any other initiative. Some 42% named it the initiative with the biggest impact among the 5 listed, ahead of on-site experience/conversion optimization (31%), new revenue streams such as international selling and marketplaces (15%), full end-to-end replatform (8%), and organic growth (4%).

In terms of site experience upgrades, on-site personalization has the most potential to drive growth, per the respondents, with 61% citing this as an area to drive growth. This is supported by previous research indicating that e-commerce conversion rates increase considerably with the number of personalized page views.

Beyond personalization, retailers also see the potential for site search and guided navigation upgrades to fuel growth. In the past, research has shown that online shoppers find search to be the most important factor in a great digital user experience, and separately, almost three-quarters of US consumers have reported being likely to leave a retail site that doesn’t provide good search results.

Other Findings:

  • The majority of retailers surveyed expect either a 6-10% (36%) increase or a greater-than-10% (20%) increase in their prices of their core products this year.
  • More than 1 in 3 will expand their customer feedback survey initiatives in order to gain more 1st-party data.
  • Retailers with larger revenues are more likely to be going headless this year than their smaller counterparts.
  • About 1 in 3 (32%) plan to expand their social commerce offering this year, with sizable shares also planning to expand their 3P marketplace selling (30%) and international/cross-border selling (26%).

Article originally appeared on Marketing Charts.

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