Retain and Regain: The Retail Marketer’s Playbook as Consumer Spending Gradually Increases

It’s only September, but 2020 has already been a memorable year for retail — the effects of which will likely be seen for years to come. The COVID-19 pandemic has caused severe swings in spending across industries, geographies and buying channels. As businesses cautiously reopen in regional patches and consumers slowly gain confidence, retail marketers must tackle the difficult challenge of retaining new customers that were acquired during the pandemic and regaining former customers that paused spending or shifted their spend elsewhere as they shopped from home. Those that don’t will risk losing ground as spending begins to normalize.

Million Dollar Question: Will Consumers Return to Pre-Pandemic Shopping Patterns?

Across all industries, in-store consumer spend unsurprisingly rises as states reopen. Based on Cardlytics’ view into $3 trillion in consumer purchase data, overall spend was down 5.4 percent year-over-year (YoY) the week of July 23 — an improvement from late March when spend hit a low of -34.3 percent YoY. Non-essential spending at low-ticket, high-frequency businesses such as salons, apparel retailers and quick-service restaurants — the categories tracked in our Recovery Leading Indicator — is heading in the right direction, but has slowed in recent weeks as physical stores were forced to re-close amidst surging COVID cases.

Credit: Cardlytics

Regardless of when spending returns, the million dollar question is whether consumers will revert to their pre-COVID-19 shopping patterns or whether their new habits are here to stay. Since the start of the pandemic, consumers have been shopping with fewer brands, both in-store and online, spending with an average of 10.5 brands before COVID-19 and 7.6 during the outbreak.

Clearly, the lockdown has changed consumer behavior and shifted brand loyalties, making it even more important for retailers to capture every sale in such a competitive environment. The retailers that are getting it right are working with us to keep close tabs on how consumer spending is shifting in their category, then putting that knowledge into play in their campaigns with us. Online grocers, for instance, are targeting consumers in geographies where we see spend returning and physical store locations opening back up in a strategic effort to hold onto the huge rise in spend they’ve captured.

Most importantly, the brands that will emerge successful are the ones that remember that where a consumer makes their next purchase isn't a foregone conclusion — it absolutely can and should be influenced with a smart marketing plan.

Rise, Retain and Return: A Playbook for Recovery

As retailers evaluate the right time to reopen and ramp up marketing, the effectiveness and efficiency of their campaigns depends on their ability to prioritize the individuals who are ready to spend. As certain regions across the country show initial signs of economic recovery, those present an opportunity.

The brands that have experienced a rise in spending must learn how to retain new shoppers, and those that saw a recent drop in demand need to act quickly to bring their customers back before they’re lost for good.

1. Rise and Retain: Industries that have experienced a rise in spending, such as home fitness, streaming, meal prep and restaurant delivery (which hit a record high with +106.9 percent YoY growth the week of July 23), and direct-to-consumer e-commerce, must focus on driving continued commerce by targeting the right customers who are ready to spend and offering incentives to retain these new shoppers in the long term. These retailers should consider using purchase graphics, as opposed to traditional demographics, to direct their marketing. Purchase graphics are much more precise than demographics because they look at what customers have bought in the past to predict what they’ll buy in the future. This is a better determinant of buying behavior than relying on assumptions based on age, gender or race. Offering cash-back rewards to customers to help them save during these difficult times and reaching them online to offer flexibility are also good strategies.
2. Return: For retailers that were hit hard by drops in consumer spending and have temporarily paused their marketing as a result, now is the time to focus on where spend is coming back and regain the loyalty of return customers. Convenience is key when it comes to re-engaging shoppers as they become more comfortable making purchases outside the home. Offering consumers numerous ways they can receive their purchases based on their comfort level, such as quick delivery and curbside pickup, is an effective approach. One of our marketing clients — a national restaurant chain — is encouraging customers to return as it begins to reopen select locations. Using actual consumer purchase data to inform its strategies, we identified consumers actively purchasing from quick-service restaurants. This helped our client reach the most likely customers and drive sales for its pickup and drive-through services.

Marketers who have been waiting for signs of recovery shouldn’t wait much longer. While customers remain cautious about spending on nonessentials and returning to their normal buying patterns, they're gradually gaining confidence overall, even though the recovery is happening in fits and starts. Retailers must act now, taking where, when and how much consumers are spending into consideration, in order to retain new customers and regain loyal customers before the holiday season hits in earnest. If they don’t, they may risk losing those shoppers to competitors forever.

Dani Cushion is the chief marketing officer at Cardlytics, a fraud-free, native advertising platform.