Data management has become one of the most important parts of scaling retail businesses today. Previously, brands were obsessed with acquiring first-party data, but now priorities are shifting to learning how to properly leverage data to continue business growth and customer retention. Sixty-five percent of retailers cite data management as the biggest problem they face in trying to leverage first-party data, according to a new executive survey conducted by CommerceNext. For its fourth annual benchmarking report, The Ascension of Digital Maturity, which was sponsored by conversational commerce leader Attentive, CommerceNext surveyed 114 retail executives spanning brand types and verticals to understand the progress and current trajectory of the retail industry, with a particular focus on today’s top challenges and priorities.
According to the report, 66 percent of direct-to-consumer companies and 54 percent of traditional retailers note increasing customer acquisition costs as their greatest challenge to achieving 2022 goals, making it imperative for brands to effectively use first-party data to better maintain customer relationships and personalize experiences.
Macro circumstances, namely COVID-19, forced retailers to accelerate digital roadmaps over the past two years. Due to immediate necessity, brands quickly developed their e-commerce channels. As part of their long-term strategies, brands are now focusing on further investing in digital. Traditional acquisition tactics no longer have a grip on budgets, while retailers focus investments on retention.
For 2022, digital budgets rebounded from 2021, with extra dollars earmarked for scaling. Digital-first retailers are outspending incumbent retailers in digital as a percentage of revenue. However, all are spending more than they previously were on investments geared toward long-term growth, particularly loyalty programs, enhancing segmentation, integrating advanced customer data platforms, and attribution tools.
Acquisition costs are on the rise, but money is going toward things like TikTok advertising, direct mailer, television ads, and influencer marketing. Data management is still one of the biggest hurdles for retailers. First-party data collection tactics like e-mail, messaging, SMS, and promotions have helped retailers see success, but now they must figure out how to optimize this data for both customer acquisition and retention efforts.
Retention is considered the most critical strategy for retail growth. Retailers’ focus now is on building customer loyalty and bringing in more first-party data to increase personalization and re-engage lapsed customers. More retailers are integrating SMS, customer data platforms, and advanced attribution tools to track and boost metrics.
Although digital and data optimization is a key component of brands and retailers’ strategy right now, economic factors, such as inflation and a looming recession, could cause temporary cutbacks in investing in those areas. January commerce sales started the year off strong, which is promising news, but February and March saw lower spending.
To continue acquiring and retaining customers, retailers are creating more customer-centric experiences to drive engagement. Acquisition continues to be a tough target for retailers, with most reporting that is one of the investment areas they feel most dissatisfied with. Customer data privacy is also getting stricter, making gaining third-party information harder.
The good news is omnichannel approaches appear to be working for acquisition. as it reaches such a wide web of customers, from brick-and-mortar to mobile. Diversifying marketing channels appears to be the current answer on how to handle customer acquisition, so businesses better start mobilizing that data.