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Will retail and brand CMOs play it safe in 2021?
Seventy-three percent of chief marketing officers (CMOs) will rely on existing customers to fuel growth in 2021 rather than look to develop new markets, according to a survey from Gartner.
The inaugural Gartner “CMO Strategic Priorities Survey 2021” showed 39 percent of CMOs planning to increase sales of existing products to existing customers vs. 34 percent who expect to introduce new products to existing customers in 2021.
The cautious attitude reflects ongoing uncertainty, but Gartner noted that the findings are at odds with the desire of CMOs to reinvent and rescale key strategies developed over the course of last year.
The survey of 381 marketers from September through October explored whether 11 marketing strategies would be either reinvented, rescaled, reduced, retired or returned to pre-pandemic levels. The strategies were:
- Traditional physical sales practice;
- Delivery or “buy online pick up in store” fulfillment;
- Customer loyalty and retention programs;
- Physical conferences and events;
- Customer/user experience research;
- Virtual sales practices;
- Health and safety programs;
- Direct-to-customer sales;
- Voice-of-the-customer programs;
- Sales via traditional retail channels;
- Virtual conferences and events.
Half of the respondents reported they intend to rescale or reinvent six of the 11 key strategies. Nearly one-third (31.8 percent) plan to rescale or reinvent eight of the 11.
“CMOs cannot reinvent and rescale everything while still executing effectively and remaining agile in a year that promises more challenges,” said Augie Ray, VP in the Gartner Marketing practice, in a statement. “Those who attempt to reinvent too much simultaneously risk failing to do any one thing right while overburdening their teams.”
A Digiday article from early January similarly found marketers likely to remain cautious and flexible in 2021, planning to put a greater focus on measurement and attribution to better ascertain ROI.
On the more bullish side, Mark Read, CEO of WPP, the the British multinational advertising agency, expects advertising expenditures to recover, climbing 12.3 percent in 2021 as marketers look to capitalize on increasing consumer confidence as vaccines are deployed. Mr. Read told The Wall Street Journal, “Of course, with the rapid shift to digital media and e-commerce, the main beneficiaries will be the big digital platforms.”
- Gartner Survey Shows 73 percent of CMOs Will Fall Back on Low Risk, Low Return Strategies for 2021 – Gartner
- ‘Focus on flexibility will continue in 2021’: Heading into the New Year, advertisers remain cautious – Digiday
- As 2020 Limps to an End, Ad Executives Look Warily to 2021 – The Wall Street Journal
- New CMO Council Report: Global Marketing Leaders Looking for Growth and Recovery in 2021 – CMO Council/Hospitality.net
Discussion Questions
DISCUSSION QUESTIONS: Do you think the emphasis on marketing to existing customers rather than acquiring new ones is a deviation from past practices? What changes for the better or worse have you seen in the marketing approaches of retailers and consumer brands since the pandemic hit, and will those continue in 2021?
Poll
BrainTrust
Dave Bruno
Director, Retail Market Insights, Aptos
Chuck Ehredt
CEO, Currency Alliance
Acquiring new customers has always been more difficult and more expensive than increasing the loyalty and purchase volume of existing customers. Therefore, it seems like the research is probably not much different than the results in the past. During the pandemic, marketers had to get very creative and quickly shift marketing strategies to address the new consumer shopping habits. These creative marketing approaches will continue through 2021 and the best strategies will become consistent as many consumers will change some shopping habits for the long-term.
The pandemic continues to be extremely disruptive. It is putting pressure on manufacturing and supply chains and has also changed consumption habits across the board. Given this backdrop, a lot of retailers and brands do not see this as an optimal time to launch new products or test new markets. They want to wait until the dust settles and they have a clearer view of what the new demand landscape will look like.
That said, it would be dangerous to completely stop innovation. There are some hot pockets of demand (masks is one example) that retailers can currently take advantage of. There are also underlying longer term shifts, such as the wellness economy, that are still in play. Brands should be thinking about these things and be ready to act once things start to normalize.
More marketing to existing customers increases the noise level that all these time-starved people have to deal with. Clever marketing could break through.
However, brands have often over-invested in new customer acquisition, rather than developing deeper relationships with mid-tail and longer-tail (less frequent) customers. There is a goldmine of incremental revenue from those households that spread their spending around if CMOs choose to target them.
Unfortunately, many of these less frequent customers never identify themselves when shopping, so communicating to them cost-effectively is a challenge. Of course, if the brands can make their loyalty programs relevant to less frequent customers, then they will win the opportunity to engage them and increase share of wallet.
One easy trick is to offer the customer whatever loyalty points/miles they really want to collect. This does not mean a brand should not have its own loyalty currency, but rather offer alternatives to appeal to different segments. The cost is far lower than the value of incremental data and the ability to engage.
My first lesson in retail was it costs 10-fold to acquire a customer than to keep one. A key statement that I could not agree with more is “CMOs cannot reinvent and rescale everything…”
I agree that expanding on existing customers should remain a top focus and must be adapted to new communication vehicles. However, the continuation of stock outages, reduction in physical mall visits, and significant change in shopping behavior is creating an unprecedented period of lack of brand loyalty. This equals opportunity for those who can successfully market and deliver.
I’m not sure that I agree with the premise that focusing more on existing customers is a “cautious” move. I would suggest rather it’s a smart move to nurture existing relationships and exceed their expectations. Given the state of the world, I think it is likely the surest path to growth. “A bird in the hand…” as they say.
This is actually a strategy being employed by firms like ours now as well: take care of/protect what you’ve got better than you ever have. In times like these, nothing is more important than your existing customers and that absolutely has to be the focus. Now having said that, should you attract new ones by employing said excellence — it’s bonus time. But now is no time to take your eye off the existing customer — it’s not only about acquisition cost, it’s about security, in retail or any service business for that matter. Not a good time for unknown evils either.
Maybe I don’t understand the question. But in the 50 plus years I have been involved in marketing, the mantra has been your current customers are your best customers. They are the most profitable. They are the easiest ones to sell to. They are the ones that fill their pantries, their homes, their offices with your brand. They are the ones who fill your bottom line.
The strategies of opening new markets are not CMO strategies, they are corporate strategies.
Since there aren’t a lot of retailers opening new stores at the moment, the focus for growth has to come from incremental sales — getting more revenue from existing operations. This means driving frequency and growing basket size. To a large degree this is accomplished with more personalized engagement and more relevant offers based on the customers locale and preferences.
Delivering unified commerce/omni capabilities like curbside pickup at scale has been a key differentiator. Shoring up personalization efforts to provide real value for customers has also been important. Looking into 2021 and beyond, retailers that are able to personalize and meet the customers where they want to be browse, buy and receive will continue to thrive.
It’s far easier to sell to existing, loyal customers than facing up to new customer acquisition costs. Share of wallet has typically been the fallback over share of market for decades — especially in uncertain times. For all intents and purposes we are in uncertain times. Not a new policy by CXOs at all, and strengthening customer relationships continues to fall in the purview of customer experience, one of the ongoing trends of the past few decades. The problem with the question is that no one can “play it safe” even with existing customers, because customers continue to change behavior and loyalties — rapidly. Shift to digital, online-offline, CX, and Covid-19 has made standing still almost impossible. This makes a multi-pronged approach an inherent part of any retail marketing strategy.
Conventional wisdom, and data, show that it is typically easier and less costly to sell more to existing customers than to acquire new ones. That said, most CMOs including myself typically have a mix of net new customer acquisition and customer cross- and up-sell in their marketing plans. I suspect 2021 will be no different — it’s a “both-and” scenario rather than “either-or.”
What might be different, however, are the methods used. Retailers and brands are increasingly turning to digital channels, including social platforms and influencer selling, as part of their marketing mix. They are also adopting omnichannel approaches such as buy online, pickup in store (BOPIS), often with special accommodations for loyal customers including preferred hours and personalized services. The winners will be those that do it well, while keeping consumers and their data safe.
This is also a time that calls for innovation and presents a great opportunity to stand out from the crowd. When other brands are receding to tried-and-true tactics and perhaps lowering their spend, it’s a perfect time for perhaps a lesser-known brand to step up with a new, different and bold tactic that gets attention. That’s a change for the better I expect to see this year. The question is, who will grab the reins and do something different and notable?
I would think existing customers are the focus for any company, with one exception: new companies. The pandemic has altered this somewhat in that many existing businesses have been forced to change their business models so fundamentally that they’re almost “new” — so perhaps a variant of the basic rule. So the question then, is: as conditions return to “normal,” and permit a return to old ways and (and old customers), will businesses follow that path or stay with new ones? I’m guessing most businesses will do the former.
While I would expect a focus on serving existing customers and markets to be the way many go forward in 2021, there are cases where one has to look at new customers. Companies that totally had to pivot in 2020 to a new customer base essentially have no choice but to try to attract new customers (but even there, can they leverage their previous customer base to transition — perhaps in some cases). But selling more to existing customers wherever possible is always a good tactic.