It's no secret that retail marketers have long been preaching the gospel of customer retention and upselling existing customers as the holy grail of growth. But with today's challenging economic headwinds, dwindling data landscape, and heavily saturated retail market, that adage may no longer be entirely accurate. Brand loyalty is under greater threat than ever, and retailers are scrambling to fill their funnels as they strive for long-term growth.
According to a recent study by the Ehrenberg-Bass institute, it turns out that loyalty isn't all it's cracked up to be. The study found that only 20% of the most loyal customers are responsible for 60% of sales, a significant difference from the previously believed 80%. And in shorter periods of time, that percentage dips even lower, meaning that the top 20% are only responsible for closer to 20% of sales.
So, what's a marketer to do? Retailers need to establish their awareness objectives with an eye towards increasing the quality of reach, rather than just driving loyalty amongst the top spenders. This will help define everything else, from frequency across screens to messaging strategies. For example, a popular retail brand announced that they're now more interested in measuring reach than spend, with the goal of minimizing excess frequency and waste.
Enter the retail media network (RMN), which is becoming an increasingly popular solution for retailers looking to expand reach. According to eMarketer, the RMN sector is set to more than triple pre-pandemic investment levels by the end of 2022, at $40.81 billion. The amount of first-party data running through RMNs is certainly attractive, but it's important to remember that first-party data alone will eventually lead to a point of diminishing returns. Retailers could end up talking to the same people over and over again while still getting just a fraction of the revenue from a finite pool of customers.
The key to success in today's retail landscape is to maximize reach in a fragmented market. Retailers must add net new consumers to their market by changing shoppers' behavior, or they have to lure consumers from a competitor. They must grow their pie or grow their slice of the pie, and ideally, they'll do both. But with the retail landscape more fragmented than ever, and a convoluted path to purchase across multiple devices, it's not as simple as it used to be.
The consumer of 2022, going into 2023, can be hard to find in mature sectors, but with the right targeting strategy, brands can maximize their share of voice when it matters the most. Retailers are searching for a new formula, one that will enable them to build audiences and identify customers with privacy-first data sets based on real-world and online behavior. And with the right data sets and targeting strategy, they'll be able to create more accurate and effective campaigns, even in today's challenging retail environment.
So, to all my fellow retailers out there, don't lose faith just yet. Loyalty may not be the be-all and end-all, but with the right approach, you can still find success in today's crowded retail market. Let's all raise a glass to the power of reach and the thrill of the hunt for new customers. Cheers!
