Today, a new report by Klarna, the leading global payments provider enabling over seven million consumers in the UK to pay later in store and online, analyses the psyche of consumer purchasing habits and what retailers can do to stay relevant in a post COVID-19 world.
In its Fast-track Upturn report, Klarna outlines how retailers must think differently to keep customer acquisition costs (CAC) low while increasing Customer Lifetime Value (CLV). The report details how current CLV calculations are outdated and how smart partnerships with trusted third parties are playing an increasingly critical role, allowing retailers to reinvest marketing budgets for maximum value.
Building an emotional connection with your audience, something that many brands struggle to achieve, is of critical importance to both retaining customers and acquiring new ones. A third of consumers (33%) said that intelligent or humourous advertising would encourage them to visit a brand or retailer’s website or store, with two in five (39%) of those aged 16-34 age saying that smart and funny advertising was the factor most likely to influence them when choosing where to spend. However, traditional digital marketing solutions are increasingly frustrating consumers, with half (49%) saying that they get irritated when brands get personalisation wrong, and 59% stating their dissatisfaction when receiving targeted ads for items they’ve already looked at or purchased.
Word of mouth
Word of mouth has always been vital, but in the age of increased digital marketing spends, Klarna’s research found just how powerful personal recommendations remain. Three in five (60%) say that when they love a brand or retailer, they’ll actively try and convert their friends. The factors that make consumers most likely to recommend a brand include an enjoyable in-store experience (16%), a good user experience across all devices and channels (15%) and a good returns process (14%).
Customers want to be acquired
Customer loyalty is a significant topic outlined in Fast-track Upturn. Klarna found that retailers cannot become complacent with existing customers otherwise they will migrate elsewhere. Two in five consumers (40%) say that they are loyal to a number of ‘loved brands’ they shop with to a certain extent, but only 3% say they wouldn’t shop elsewhere if they saw something they liked. Price remains king, with 58% of consumers saying that price plays a key role in deciding to use a new brand, but flexible payment options are also becoming increasingly important, with 18% of shoppers noting this would be a factor in trying out a new retailer.
When the world recovers from COVID-19 and retail stores begin to open, the Fast-track Upturn report highlights the role that in-store experiences will continue to have in the future, especially when it comes to customer acquisition. 35% of consumers say that an enjoyable in-store experience would make them more likely to shop with a retailer, and 30% say that it would make them more likely to purchase more from them. Over a third also noted they would be more likely to shop with a brand or retailer that is associated with fun experiences. The importance of physical experiences is not lost on younger generations either, with one fifth of those in the Gen-Z audience noting they had their first interaction with a brand through a pop-up shop or physical experience. This age demographic were also the most likely to value additional in-store services such as Wi-Fi, food and drink and charging stations.
Laurel Wolfe, VP of marketing at Klarna, commented: “In today’s world, marketers across the globe are being challenged to think differently about how they approach customer acquisition and retention – especially in light of the current situation. Our report highlights the importance of selecting well-connected partners. An example is Klarna, who can fast-track acquisition with access to over seven million loyal customers in the UK to boost awareness and brand-love. By being strategic with their partnerships, retailers will see cost efficiencies, increased sales and the flexibility to redirect budget to areas where it could be better spent.”
Andrew Busby, founder and CEO of Retail Reflections, commented: “Across the retail spectrum there was no doubt that 2020 would be a crucial year, even before the impact of COVID-19. Outdated CLV models based on previous consumer behavioural insights will be unable to provide an accurate depiction of customer value, so marketers need to take a step back and look at an engagement-first approach. Retailers are increasingly recognising the importance of partnerships in order to adopt smarter ways to convert customers. In a constantly evolving market, It will be those who engage with the right partners and adapt to new changes who reap the customer rewards.”