In December we learned that, at 5.4%, inflation has reached its highest level in 30 years. If the Bank of England is correct, the consumer prices index will hit around 7% by April. The more pessimistic economists have even predicted inflation reaching 1970s levels. Whatever the exact scale, it’s likely the effects of Omicron and high energy costs will damage global growth throughout 2022. But to what extent might businesses suffer? How entrenched might inflation become?

The Causes Behind Inflation

Global supply chain disruptions have meant higher costs for shipping and distribution, plus fewer goods and services on the market. Staff shortages due to Covid have also dented supply. However we can’t entirely blame the pandemic. Another factor is escalating energy prices. Oil prices, for example, rose by 15% in January and are expected to rise further this year. The UK government fears that, in total, annual energy bills will increase by £500 per household.

And all of this has been underpinned by low interest rates and government financial packages where money has been pumped into the economy to ease the effects of the pandemic.

Falling Real Wages

Senior economist at the Resolution Foundation, Hannah Slaughter, has noted that inflation-adjusted pay is now shrinking for the third time in a decade. (In 2017 the Brexit referendum caused a hit to the pound, and the financial crisis affected real-terms pay between 2011 and 2014.) Slaughter predicts the squeeze on pay will continue into next summer too.

This will be exacerbated by April’s rise in National Insurance contributions. Despite calls for this to be delayed or stopped altogether, Boris Johnson and Rishi Sunak are pressing on, arguing it is necessary to pay for the NHS and social care.

The effect? This month NielsenIQ research indicated that nearly half of all households say their most important concern is the rising cost of living.

Uncertainty For Businesses

Should businesses still try to pass on their rising costs to consumers? Or do we accept falling margins and damage to our supply side?

Of course the answer will be different for each business, depending on various factors. Some large businesses will be able to absorb the costs themselves, thanks to their financial resources. Another factor is the type of product or service they produce. How elastic is the demand? (Or put differently, how essential is the product to people’s lives?) Food inflation has risen to 2.7% in January, the highest rate since 2013. This issue is understandably high on the political agenda and retailers are working hard to cut costs. However, according to Helen Dickinson, Chief Executive of the BRC, it’s inevitable that consumers will face price increases.

The exact food or type of product will also influence which businesses can pass on costs. As food writer and activist Jack Monroe points out, inflation impacts on consumers to varying extents, with those on the lowest incomes bearing the brunt. While some households will be relatively unaffected by price hikes, others will need to drastically change or reduce their shopping lists. 

Other areas of high inflation? Products such as furniture and flooring have seen large increases due to high demand and rising oil costs. Construction is generally under pressure – housebuilder Persimmon has warned of material prices going up by 5%. Eating out looks set to remain expensive although this depends, in part, on the pandemic and the supply of workers. The hotels and restaurant group Whitbread, for example, said it expected to face 7% or 8% inflation on around £1.4bn of its costs.

Cause For (Cautious) Optimism?

Arguably, since much of the inflation is due to the pandemic, so long as another serious variant doesn’t emerge there’s reason to believe some of the effects could be short-term. Supply chains will recover. Staff should be able to return to work. The jobs market has already seen positive signals, with unemployment continuing to fall despite the end of the furlough scheme.

Recently the government has announced help for households – a one-off repayable £200 discount on energy bills, along with a rebate on council tax. As of yet, however, Sunak has not committed to giving financial help to struggling businesses and manufacturers.

As for the Bank of England, it has increased interest rates to 5% in a bid to contain price pressures. It also plans to unwind its quantitative easing programme. 

The Bottom Line

What we do know is that businesses are worried. A survey by Iwoca, a small business lender, reported that nearly three out of four small business owners felt inflation was a top concern in 2022. Some believe this inflation will become entrenched. Nick Moakes, investment director of the Wellcome Trust medical research charity, for example, said inflationary pressure may lead to the toughest investment market since the financial crisis.

The rest of the world is facing difficulties too. The IMF has downgraded projections for US economic growth from 5.2% to 4% this year. EU countries are likely to grow at a slower pace than previously thought, similar to the global economy.

The future for businesses? It would be unwise to dismiss such concerns around inflation. But let’s remain energetic about how we can manage costs, adapt our strategies and generally keep an open mind about how to evolve.

Business owners are under constant pressure to evolve, react to trends, and, most importantly, make sales. In recent times, the constant conflict between customer acquisition and customer retention has been even more pressing.

Although food retail businesses like Ocado experienced record-breaking profits amid the pandemic, businesses that offered non-essential products were not as fortunate. Arcadia was one of the first and largest UK corporations to fall victim to COVID-19. Other British staples like Victoria’s Secret and Bonmarché followed the same worrying trend. 

While some businesses boom, others fall short of their targets and become just another figure. The Office for National Statistics noted that total retail sales fell by 1.9% in 2020 compared to 2019, which is the largest annual fall on record. As more businesses crumble under the pressure of increasingly fierce competition, owners wonder how to handle the conflict between customer acquisition and customer retention.

What is Customer Acquisition?

Anyone who is in the business world knows about customer acquisition. In simple terms, this phrase refers to a company’s ability to secure new clients. Large organisations have entire marketing departments dedicated to enticing prospective clients.

Customer acquisition strategies include email campaigns, targeted Facebook ads, refreshing old content, and any other marketing tactic that is done with the intent of persuading potential customers. Savvy marketers will employ the skills of their finance department to work out an average customer spend formula to decide whether their efforts are worthwhile.

To work out your average customer spend formula, simply divide your total sales by your customer headcount.

Once a business has succeeded in acquiring customers, it must retain them. Acquisition and retention operate in tandem; acquisition does not end when retention begins. Both play a vital role in the smooth running of businesses all over the UK.

What is Customer Retention?

In our free market, customer retention strategies are more important than ever. Customer retention rates tell business owners the percentage of customers that return for extra services and goods. Another way of looking at this concept is customer loyalty and retention.

Online retailers know better than most that capitalism breeds innovation. This oft-quoted phrase has been stretched to the limit in recent years. The free market, which was once upheld as a symbol of opportunity for entrepreneurs all over the UK, has since entrapped them.

Consumers are bombarded with thousands of options and services. More often than not, their options sound similar, look similar, and accomplish the same end goal. Copycat brands, which are also known as cheater brands, mean that competition is fiercer than ever before in the online space.

The Gaming Industry

Hopeful entrepreneurs only need an internet connection and a supplier to operate a direct to consumer (DTC) business. The number of DTC businesses has grown in recent years alongside the pandemic. Fierce competition has encouraged business owners to reconsider their customer acquisition and customer retention strategies. The COVID-19 pandemic has highlighted one industry as a stand-out success.

The gaming industry presents online retailers with a working model of success, even during the hard times of the pandemic. Covideogamers, who make up 18% of current gamers in the UK, pushed the video game market to a record £7bn in 2020 and made gaming the UK’s most lucrative entertainment sector

One thing is clear: marketers in the gaming industry are ahead of their time. Mobile gaming accounts for 50% of customer acquisition spending, whereas e-commerce only accounts for 16%. In this article, online retailers can learn about modern, effective customer strategies in the gaming industry.

Create Habits

Habits create loyal customers. Game developers collaborate with marketing experts to develop promotions and alerts that encourage users to return to their games. If you can encourage a user to return three or four times, the chance is that they will develop a habit.

So, can online retailers integrate this tactic into their customer retention strategies?

Lots of online retailers already attempt to entice customers back to their websites. Email marketing leads the way in this type of strategy. Retailers might use discounts, promotions, or even urge customers to check out their basket before it expires.

By combining industry-standard strategies with a more game-like aesthetic, online retailers can create habits and boost business. Take, for example, the standard prize box games that gambling apps utilise every day. Apps like Bet365 offer users a choice between three presents. If players pick the right box, they can receive anything from free spins to money that they can stake in a game of their choice.

Online retailer prizes could include discounts, free items on purchases over £20, or exclusive access to new products. If you implement a time-sensitive mystery prize, customers will regularly return to your site.

Develop Growth Loops

Proponents of growth loops disregard standard marketing funnels. Funnels, which have been widely accepted as an essential marketing strategy for the last decade, present a linear view of customer experiences. Growth guru Brian Balfour pointed out that acquisition, marketing, and revenue actually exist in a loop. In this self-contained loop, customer acquisition strategies and products work side-by-side to bring in more customers.

In his own words, ‘Loops are closed systems where the inputs through some process generates more of an output that can be reinvested in the input. There are growth loops that serve different value creation including new users, returning users, defensibility, or efficiency.’

Customer acquisition costs pay for themselves when you implement a growth loop. Here are some examples of the different types of growth loops.

Online retailers can develop loops by incentivising customers to post pictures of recent products on social media channels. By offering customers 10% off their next order with each post, retailers can boost their social media strategy and drive traffic to their sites.

Advertise on Gaming Apps

People in the UK spend on average 4.2 hours per day on apps. This figure has increased by 30% in the last two years alone. Since the COVID-19 pandemic first began, more and more people seek entertainment from the comfort of their own homes.

Mobile games have proven to be an effective opportunity for retailers that want an on-trend customer acquisition strategy. Mobile app CTRs exceed website CTRs in most industries. Gaming is no longer a stereotypically young male pastime, which means that all sorts of different online retailers can create tailored ads for their target audiences.


Cross-selling is a central customer retention strategy in the gaming industry. Cross-selling occurs when a company researches customer behaviour and transitions specific subsets to more valuable games. This tactic aims to turn a single product customer into a multi-product customer.

In simple terms, cross-selling asks customers, ‘If you like X, why don’t you try Y?’

Online casinos and social games are the main proponents of this marketing model. Paddy Power uses in-game notifications and email offers to nudge users towards different casino games.

Cross-selling is difficult for online retailers to implement with success. Fashion companies already utilise the less-invasive, ‘people who viewed X product also viewed Y product’ tactic. To truly succeed in cross-selling, fashion retailers could create a ‘fashion PA’ style email system that introduces consumers to complementary products.

Most companies will struggle to execute this tactic across the board. It is best suited to companies that have a large marketing spend per customer budget. When done right, it can add real value to your company in terms of customer loyalty and retention.

Create a Community

The simplest strategy is often the most effective. Social media integration seems like a no-brainer, but lots of online retailers are still falling short. In 2020, the average person spent almost two and a half hours on social media per day. Online communities present an opportunity for retailers who want to develop brand awareness.

Fortnite’s Party Royale feature is one of the best examples of social integration. Party Royale gives users a space to meet their friends and play with non-lethal weapons. This integration has increased play time by 130%.

Social spaces allow users to feel like they are part of a community. Implementing this customer acquisition and retention strategy is as simple as adding a forum page to your site. This tactic is best suited to businesses that sell hobby-based products like sewing supplies and mountain bikes. You can start discussions by posting evergreen content like FAQs and how-to guides that provide value and boost organic traffic.

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