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Price of Google advertising stops etailers hunting for new customers

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The spiraling cost of attracting new customers using ad words and other online advertising, is prompting online retailers to focus their efforts on selling more to existing customers.

The latest data from IMRG and Capgemini has revealed that active customer retention rates reached a record high of 36.4% during the period May to July 2016, a full five percentage points up on the same quarter last year.

This means that the percentage of customers making return purchases was at its highest rate since the consultants started tracking it in 2010, while conversely the percentage of first-time customers was at a record low.

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The costs associated with retaining customers are typically less than when acquiring new ones – which may involve bidding for expensive, high demand Google search terms for example – and this may have reflected a generally more cautious approach among retailers in how they used their marketing budgets during the period leading up to and including the EU Referendum.

The average selling price per item reached its lowest rate in over three years in Q2, down a full 9% on the same period last year – which suggests that there was a lot of discounting over the quarter which also featured Amazon Prime Day.

Tina Spooner, chief information officer, IMRG said: “The record high customer retention rate suggests a more conservative approach to how retailers are assigning their marketing budgets, and a number of factors may have influenced the fall in average selling price per item – disappointing weather in May and June, concerns over the referendum, Prime Day etc. Yet what’s interesting is that overall online retail sales growth performed well over this period (up +17% yoy), with July’s growth (+19%) the highest since November 2014. The average basket value that shoppers are checking out with – which may include multiple items – was also up, despite the fall in individual item prices. So ultimately, as unpredictable a period as we may now be in, this approach seems to have kept customers engaged overall so far.”

Tags : Ad WordsCap Geminie-commerceEtailgooglemarketingonline retail
Josh Corder

The author Josh Corder

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