Retailers often focus on customer acquisition—a costly prospect—at the expense of customer retention. Instant gratification can be a bigger incentive than building loyalty over time.
In a November 2018 Retail TouchPoints survey, retailers' spending on acquisition and retention weren't radically different on the surface. Most budgets for both tactics hovered in the 10% to 40% range, but nearly three times as many retailers allocated 50% or more to acquisition.
One-quarter said they could turn 10% to 20% of new customers into repeat purchasers. Roughly the same amount had higher expectations, believing they could turn 20% to 30% of newly acquired customers into repeat buyers.
What are the challenges retailers face with retention? Some of the biggest obstacles cited were competition and losing sales to lower-priced marketplaces like Amazon, but the nature of long purchase cycles for products loomed largest.
Top tactics used by these retailers for customer retention were discounts (77%), free shipping (52%) and loyalty program points (44%). A majority (51%) of retailers in this study offered loyalty programs, but points and rewards don't always lead to retention.