For the retailer, keeping customer acquisition costs low in comparison with lifetime value can directly stimulate the profitability of a customer segment, product line and ultimately the entire company. However, as businesses mature and expand geographically, existing acquisition strategies such as advertising, discounts and promotions can diminish in their effectiveness. To combat this, home retailers need to consider innovative new ways of gaining customers efficiently and effectively if they are to continue to grow.

The cost of customer acquisition

The customer acquisition cost (CAC) typically relates to the total sales and marketing cost required to earn a new customer over a specific period of time. This could include everything from website maintenance, online and offline advertising, to awareness spend such as pay-per-click, PR, events, merchandizing, salaries, commissions, bonuses and any further overheads associated with attracting new leads and converting them into customers. The CAC can be calculated by dividing the total amount invested in all these tactics during a specified time period by the number of customers acquired.

Additionally, it is important that CAC is observed in the context of a customer’s lifetime value to the company. In the home retail sector, customers rarely make a single purchase in isolation and that needs to be taken into account when making calculations. A home improvement project often requires multiple visits to the store or website for different stages of the project and consumers frequently return after the project has been completed.

Increasing lifetime value

The retail sector as a whole operates on very slim margins, typically between 0.5 percent and 3.5 percent. New strategies to reduce CAC are therefore crucial for home retailers to maximize profit and drive improvements to the customer journey.

One of the most effective ways to do this, and increase lifetime value at the same time, is by offering customers items that are of value to them and will make them spend more time in-store or online. This could take the form of a product fix, a new feature or complementary product offerings. In the instance of a home improvement project, a significant purchase driver for consumers is having the confidence that the look and feel, as well as cost, of a room is exactly as they envisioned.

Personalized offers and products are another commonly used way to improve customers’ lifetime values. By providing easy-to-use and accessible tools that help consumers do exactly this, retailers can ensure that consumers spend more time in their stores and therefore are more likely to make larger quantity orders or higher value purchases.

Maximizing profit with 3D planning

With a cloud-based 3D planning solution that can be hosted online and in-store, home retailers can effectively increase customer engagement and reduce CAC. By allowing consumers to define their own projects based on the exact dimensions of their rooms, the retailer can secure engagement and a level of buy-in from the beginning of the buyer journey. The intuitive platform offers great ease of use and has an integrated digital catalog, delivering tremendous value. The solution saves the consumer hours of their own time by helping them to envision their projects, try out different options and see what works best for them.

When calculating customer acquisition costs for complex purchases like home improvement, the amount of time a sales professional typically spends with each consumer to nurture and convert the sale is often overlooked. An optimal sales process should allow consumers to complete the purchase process more autonomously. Consequently, retailers have invested millions in optimizing their websites to be more intuitive and improve conversion – something that comes built in as standard with a 3D home planning solution. The solution transforms a complex sales process, involving multiple store visits and hours of consultation time, into a simple self-service solution, accessible online 24×7. For the sales professional, time can therefore be allocated to more customers in-store who are further along the sales cycle.

According to an Accenture report, 91 percent of consumers are more likely to shop with brands who provide relevant offers and recommendations. (Source: Accenture) With a 3D home planning solution, home retailers no longer need to treat every customer exactly alike. Data can be collected from user profiles that gives insight into each consumer’s product preferences, points in the process where they ran into difficulties, and more. Retailers can use this data to engage with customers, presenting them with highly personalized offers that generate higher conversions, increasing the average revenue generated per user on a long-term basis.

Achieving sustainable value growth

No matter what the marketing mix and top-line growth of a home retailer might be, it is clear the cost of each customer acquisition needs to be minimized in order to drive sustainable value growth for the company. For a home retailer, investing in an online 3D planning solution will allow them to implement many of the most common CAC reduction strategies at a single shot, while driving top-line sales at the same time for the best possible return.

To further explore how a 3D planning solution can reduce your customer acquisition costs and increase lifetime values, visit our website built specifically to serve home retailers: HomeByMe Furniture & Decor Planner, where you can organize a demonstration of the platform with a member of our team of experts.

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