How Brands are Controlling their Customer Acquisition Costs

How Brands are Controlling their Customer Acquisition Costs
At IReC (Industry of Retail and E-commerce summit) 2022, various retail and e-commerce brands have talked about why focusing on customer satisfaction and customer retention is the way to increase the lifetime value of the customers.

By Vaishnavi gupta , Sr Correspondent

02 Aug 2022 | 7 min read

Over the last decade, customer experience has become a well-known buzzword for marketers around the world. A bad user interface results in a bad user experience, and a bad user experience results in lost business. Customers are busier and more time-strapped than ever - they require a simple, clear, and intuitive digital experience to stay engaged and more importantly, come back for future business. 

Customer experience is fast becoming a top priority for businesses, and rightfully so, statistics prove that 86 percent of buyers are willing to pay more for a great customer experience. According to a Gartner study, in 2022, 81 percent of companies will be competing mostly or completely on customer experience.

At IReC (Industry of Retail and E-commerce summit) 2022, various retail and e-commerce brands have talked about why focusing on customer satisfaction and customer retention is the way to increase the lifetime value of the customers.

Akila Chandrashekhar, CMO, Organic India said that conventional marketing was favoring the mass marketing people when you had to market to a niche audience or with a niche product, the cost of acquisition was actually higher because there was so much wastage. “With us, digital marketing has proved to be a boon, where there is a philosophy and ethos to be sold, and there's a product benefit information led product to be sold to a niche audience. For a brand that has so much to say and is targeting a very specific kind of mindset, digital marketing has allowed it to find out where these people are specifically targeting and talk to them, however, in conventional marketing, when we had to speak to a niche consumer, we would attack the Citibank database that was about as far as we got to targeting the niche consumer. Therefore, we've come a long way from there,” she stated.

A category like fast-moving goods will have different acquisition costs than a category like luggage as people need logical reasoning before making a purchase of high price items. “For Samsonite, mainly into the luggage and backpack categories, the same customer purchase happens between three to five years and that's the average purchasing cycle. For us, 90 percent of the purchase happening online is done by new consumers. Currently, our acquisition cost is around 7- 8 percent. We are trying to reduce our customer acquisition cost by doing an in-market audience target. We re-target the local customers who have dropped out to bring down the acquisition cost and build upon the larger base of the consumers,” Pradnya Popade, Marcomm Head, Samsonite South Asia Pvt Ltd noted.

Today, people can't look at digital as an isolated space. There is no such thing as an isolated or single channel where the entire purchase loop is happening in a linear fashion and especially so in digital because at every stage, there are brands or categories which are more loyalty-led and where there is less experimentation while then there are categories where there's more experimentation. So, digital marketing or e-commerce plays different roles in the consumer life cycle as far as acquisition is concerned. In certain cases, it could just be an awareness-driving platform. In other cases, it could build trials where you are just trying out a product for the very first. In certain cases, it's a regular purchase where I know that this is my sought-after brand. And I find it here on this platform and I buy it. “So as a consumer, you are not really in a linear space; it's a journey and it's so well integrated into between the offline and the online world that you can't necessarily only look at customer acquisition cost on the e-commerce platform because at every stage you're adding value to the brand and consumer,” Prerna Tiku, GM Brand Marketing, MTR Foods Pvt Ltd said.

Abhishek Joshi, AGM - E-commerce- Sales & Marketing, Ghodawat Consumer Ltd added, “Acquisition costs are getting higher and higher day by day, and a brand like us that is into the FMCG space, ASP (average selling price) is very important for us. We are selling low ASP SKUs on all e-commerce platforms. To measure the cost of acquisition and ROI, we always look at the factor of how to increase the ASP of our SKU and compensate the acquisition.”

Similarly, a brand like KT Professional (Ccigmaa Lifestyles Pvt Ltd), which is primarily in the beauty business with the Keratin protein-focused hair care solutions, supplies products that are beauty oriented and are targeted largely to every sector and city. Therefore, the brand has to offer different types of products for different head textures. For the brand, the client acquisition cost is more towards educating the client and giving them the right information about the product. “So even when people are purchasing these products in salons, they really use e-commerce to check the trustworthiness of the product and the availability of the product online as well. The sale may happen offline in the salon, but they would still check the reviews that would be online and the credit history of the product. Therefore, the online-offline mix has to be very well integrated for the client to have a complete experience,” Dhruv Sayani, MD, CCigma Lifestyles explained.

Over the last decade, customer experience has become a well-known buzzword for marketers around the world. A bad user interface results in a bad user experience, and a bad user experience results in lost business. Customers are busier and more time-strapped than ever - they require a simple, clear, and intuitive digital experience to stay engaged and more importantly, come back for future business. 

Customer experience is fast becoming a top priority for businesses, and rightfully so, statistics prove that 86 percent of buyers are willing to pay more for a great customer experience. According to a Gartner study, in 2022, 81 percent of companies will be competing mostly or completely on customer experience.

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