Study: Online Customer Acquisition, Retention Costs Fall Sharply in 3Q

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The third quarter of 2001 saw online customer acquisition and retention costs fall dramatically, down 40 percent and 50 percent respectively, according to a recent study by retail trade group Shop.org and The Boston Consulting Group.


The study, which surveyed 63 retailers of various sizes about their third quarter 2001 online performance, found that acquisition costs fell to $12, from $20 a year ago. Retention costs declined to $5 per customer, from $9 in the third quarter of 2000.


The drop was precipitated by increased marketing efficiency brought about by more targeted spending, the study said. The use of online marketing reached an all-time high in the third quarter, with 78 percent of overall marketing spending going online. E-mail marketing accounted for the greatest amount of this increase, the survey said.


"Since the dot-com correction and through the current recession, retailers have learned to be better marketers online, which is helping to put them in stronger financial shape than [in 2000]," said Elaine Rubin, chairman of Shop.org.


The survey also found that many retailers have increased the multichannel integration of their marketing efforts, such as by using their Web sites to promote their stores and to offer catalogs. They also have increased their collection of e-mail addresses during in-store and catalog transactions.


"Despite concerns about the economy and lingering skepticism about online sales, what we're seeing now is true integration of a new channel into both consumer behavior and retail strategy," Rubin said. "Perhaps the most notable developments were the steps many retailers took to integrate their sales channels. That's due to the fact that in a challenging environment, one of the most effective ways for retailers to increase their share of the consumer's wallet is to focus on cross-channel coordination."


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