The 3R System: How Retailers Can Minimize Customer Acquisition Costs

February 18, 2014 Ashok Sivanand

This post originally appeared on the Mobile Retail Blog.


It’s never been more important for retailers to build one-to-one connections with customers. To do this in a scalable way, they can serve tailored content in real-time. By building this deeper loyalty, retailers can minimize their customer acquisition costs and increase their margins. Using various hardware capabilities, mobile technology enables this level of contextual advertising and serves customers with relevant content. For example, is the customer already in-store? Great, they’re well on their way in the path-to-purchase – close them with a coupon (bonus points for making it time-sensitive) for the store they’re in right now. However, such advanced solutions need high-performance infrastructure to serve these hardware demands.

Data is the essential ingredient to this recipe. Retailers earn the data from customers to provide better customer experiences and products. In order to help them do this, I would like to introduce the 3R system. The 3R system serves as a high-level framework for retailers to minimize their cost per customer acquisition. Surprisingly, not everyone is investing in analytics at the time – in fact, 28% of retail respondents to this Retail Info Systems News survey aren’t even currently researching options.


Source: RIS News


Retailers investing in loyalty programs leave opportunities on the table unless they’re also collecting data on consumer insights through the program (e.g., loyalty card or app system). The data essentially allows for contextual marketing using location analytics – as well as access to valuable demographic and psychographic data.

Data is the difference between simply giving away coupons, and tracking trends and understanding consumer buying patterns and intelligence. Don’t waste these opportunities! With this information, you can make better programs and offers – all based on the data that you’re collecting. A large part of the reason that Amazon is such a powerful eCommerce retailer is because they collect tons of consumer insights – and can recommend products that are perfect for their customers.

The cover page of digital flyers should be different for each user. Different consumers have different interests, buying power, and needs. Data and real-time technology allow you to tailor your cover pages and other offers accordingly. These tools previously available only to the largest tech companies, such as Facebook and Google, are now available to all retailers. You don’t need the same buying power or implementation intelligence use them.

The apps that you’re building should be collecting as much data as they’re displaying. Personalize information as much as possible based on analysis; use technology that can do this in real-time.


As mCommerce apps grow more intelligent, they will serve not only as a facilitator of transactions, but entice users with frictionless mobile loyalty redemption.

I once sat on a panel with LoyaltyOne’s Senior Director of Research and Development, Jeff Berry, who mentioned something that raised my eyebrow: every loyalty program user’s average redemption rate should be at least 65% of points accumulated. If it’s any lower, customers aren’t engaged or – worse yet – indifferent about your loyalty program. In their mind, the loyalty program doesn’t play a factor in getting them to return to the store.

Redemption signifies the value of the program to the consumers; it serves as an indicator for how engaged members are. That means redemption rates are also a leading indicator that will help you manage customer attrition rates. The best loyalty programs reward users for redeeming their points – with more loyalty points, just as if it was a regular purchase.

This means one strategy to engaging users is to remove as much friction as possible in your omnichannel and mobile solutions for customers to redeem points. Don’t make them jump through hoops like going in-store or redeeming points through the phone. Instead, integrate the ability to redeem points into your mobile solution.


If you owned a brick-and-mortar store, would you ever let the location get run over by pests? As every good store manager knows, maintenance is a prerequisite to a high-quality consumer experience – which is key for customer satisfaction. Along the same lines, ensuring that your mobile app is reliable is essential for a positive customer experience. My colleague Paul Vlahov had written more about this analogy previously.

Worse yet, your mobile investments and efforts could be detrimental to your brand if users sense underinvestment. For example, if your omnichannel experiences don’t work or they don’t work fast enough, or if they’re not updated to today’s design trends and patterns (like Facebook, Google, and Amazon’s user interfaces), your digital channels could actually alienate customers.

Remember: the fastest growing companies are embracing tech and using internet-based tech to provide the best experiences. As Pivotal CEO Paul Maritz said in an interview with The Economist: “Enterprises are going to have to shift from where IT was really just about automating undifferentiated back-office functions to using IT as the fundamental product of what they do.”

An example: one of Pivotal’s clients used to see huge revenue losses during peak holiday seasons, like Thanksgiving and Christmas. That’s counterintuitive – it’s often retailers’ best seasons. As it turns out, their backend wasn’t equipped to handle the capacity of volume and people ended up using other competitors instead. Picture this: the customer would go through the customer purchase path and end up denied right as they’re about to complete the transaction. How frustrating! Pivotal’s solution ensured that the client took advantage of the best retailing seasons of the year.

Don’t waste your mobile resources by neglecting the fundamentals; make sure your solution is reliable for the user.

Closing Thoughts

Minimizing customer acquisition costs is crucial to earning higher margins. In this case, your customers are your greatest sources of learning. But you don’t have to start from scratch; following the 3R guide will put you in a much more advantageous starting position than your competitors. You’ll have learned from mistakes that we had to spend time and resources solving. The fundamentals of relevance, redemption, and reliability are more important than ever today.

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