Sales Lift And LTV - Why We Still Undercount Shopper Marketing ROIs In Store2 November 2021
At Perch by Raydiant, we hang our hat on sales lift. You will see our sales lift diagram on virtually every major page on our website. When you drive 30-180% sales lifts, you tend to wave it around like a badge of honor. Because at such sales lifts, the proposition is compelling.
Recently we measured the latest sales lift analysis for a client, which had low sales lift expectations because it’s difficult to switch products in their category. As you can see below, in the first 5 months sales lift has steadily climbed to nearly 30%.
30% sales lift made them ecstatic of course, especially when deployed to hundreds of stores. And our ROI analysis shows a 232% return on spend. But as we looked at the data, what’s most impressive is the steady improvement in sales lift. 1% additional lift every week.
As a result, any one time measure of sales lift undercounts the true value of customer capture, because these were not one term purchases - they were acquiring customers that generated repeat purchases and large life time value. In their category, 29% of shoppers shop weekly and another half shop every 2-3 weeks. As a result, as every week they convert new shoppers, it builds upon their existing base. By the end of the year, we expect sales lift to be above 40%.
And this underlies the true value of customer acquisition. It’s not the sales lift for that week, but the life time value of the customer acquired. This is summarized nicely by the following formula.
Interestingly enough, most of our clients don’t have formal lifetime value calculations in their brick-and-mortar sales groups, although their online marketing counterparts rely on them for ROI. In this way, in-store shopper marketing groups are operating at a disadvantage to online acquisition, in part because it’s harder to track purchases across customer profiles in a CRM. This is where data is increasingly needed in physical retail. Until then, research provides enough direction to measure aggregate LTVs and apply them to in-store efforts. Or you could follow the increasing sales lift trend and measure the aggregate incremental sales, although this is quite a bit harder.
Now as an aside, another area where we drive continuous sales lift, is through our Shelf Analytics Platform and Perch by Raydiant Cloud. Perch by Raydiant is a transformative platform delivering new data insights into shopper behavior at the shelf and we use these insights to change the way CPGs think about planogram design, content, merchandising and promotional strategies. We measure omnichannel conversion and how we can convert in-store shoppers to online or mobile shopping. So there is much more to a full sales lift analysis and continuous improvement dynamics.
No matter how you slice it, we are undercounting the value of the store in generating the full lifetime values of loyal customers. And when we do, we will continue to enforce why physical retail is the key to driving profitable growth.