What a week! The high level of discussion around the Online Retailer Expo & Conference 2010 should dispell any doubts about Australia's near-term future: Online and multichannel retail have entered a period of rapid expansion. That was the theme of my colleague Patti Freeman Evans' conference keynote. It was a theme of both of my sessions at the event. It will be a theme of research that we expect to release shortly. And it was a theme reinforced by countless private conversations we had in Sydney and Melbourne last week: Expect continued growth and increasing competition, from home and abroad, and from both traditional retailers and new entrants, including some firms you certainly weren't expecting. Indeed, there are exciting times ahead.
So far, so good. But how will we get there? As competition increases, how will online and multichannel retailers attract and retain the most profitable customers and increase their lifetime value? Marketing leaders must answer this question, and they must answer it with more sophistication than is common in Australian online retail today.
In researching my latest report, "Online Retailing In Australia 2010: Marketing, Merchandising, And Customer Service," I found that most Australian online retailers use analytics, but generally in a limited way.
A common use would be to measure and compare the ROI on a range of acquisition tactics, such as search advertising and banner advertising. So far, so good — if acquisition is the start and finish of marketing.
Also, it's not uncommon to use split testing or multivariate testing to trial and improve the conversion rates associated with merchandising tactics — although "testing as a discipline" is still far from universal.
However, very few online and multichannel retailers are measuring the lifetime value of their customers. Few are measuring the impact that their marketing, merchandising, and customer service efforts have on lifetime customer value. The result: strategies that are skewed toward acquisition, at the expense of retention.
To date, this bias has not caused too many problems for most online retailers. Growth has been strong, and the fish keep hopping into the boat. But competition will increase in Australian online retail — this we know for sure — and soon most online retailers will want to know the cost and benefit of retaining their most profitable customers. Marketers, at your mark.
I've love to hear from all of you about the state of Australian online retail: do you think our marketing leaders are ready for increased competition and potential customer attrition? Do you think they are ready to measure and manage retention?