INCREASING CUSTOMER ACQUISITION & RETENTION WITH 1ST PARTY DATA
Win customers and keep them (profitably). For D2C businesses, it sounds so simple.
It that sounds reductive, consider that failing to acquire new customers or retain existing customers, or failing to do so in a cost-effective manner, is detrimental to operating results.
Success depends on the ability to increase net revenue per active customer.
With marketing (particularly paid traffic) representing the bulk of expenditure, it’s small wonder that ecommerce businesses rigorously manage marketing efforts so that each new spending initiative is cost-effective with a measurable return on investment within a designated period of time.
This post explores how brands improve their chances with data.
BARRIERS TO ECOMMERCE GROWTH: CONTRIBUTING FACTORS
When historic growth rates aren’t sustainable or indicative of our future growth, how do businesses ensure that the net profit from new customers will ultimately exceed the cost of acquiring them?
Several factors contribute to a more difficult marketing landscape:
1. It’s hard to stand out from the crowd in the shark-infested waters of paid traffic platforms. In an auction-based environment, it’s a level playing field.
When it comes to media optimisation, now more than ever the algorithm is doing the heavy-lifting – rendering media buying expertise increasingly redundant.
2. Actions by third parties to block or impose restrictions on the delivery of certain advertisements can adversely impact business. Examples include ATT framework from Apple’s iOS14 update, ITP-enabled browsers like Safari, ad blockers, and Google’s plans to change the ways that third parties can use web browsers to obtain user information.
The so-called ‘cookiepocalypse’ makes it harder to target, optimise and report on marketing efforts.
3. Low barriers to entry are increasing competition. Whether it’s in the form of easy-access financing (e.g. Clearbanc), low-code platforms (e.g. Shopify), or ubiqitous marketing channels (e.g. Facebook Ads).
Increased competition increases cost-per-click rates and acquisition costs.
1ST PARTY DATA INFRASTRUCTURE
If efforts to increase the customer base and repeat purchasing are not successful, then growth prospects and net revenue are adversely affected.
Brands have two options:
1. Improve efficiency of cost per acquired customer (acquisition)
2. Improve customer lifetime value (retention)
They need to do both.
To reduce acquisition costs, it’s imperative to integrate first-party data into bidding and targeting. With paid ads, brands win the auction-environment by integrating their own data, rather than playing on the same terms as the competition.
To increase retention, first party data (once again) can be leveraged to bid and retarget based on known customer profiles – a strategy that applies both to paid traffic and email efforts.
Wayfair Inc (NYSE: W) – which owns wayfair.com among other domains – leverages in-house advertising technology to target customers efficiently across various channels, including campaign management and bidding algorithms.
Fortunately, there’s no need for brands to build their own tech to leverage first party data (Wayfair has been in business for 20 years). Instead, they can and should take advantage of the ‘modern data stack’ – an affordable, fast-to-market set of tools for moving and storing data. Brands can operationalise the data that they already own by leveraging cloud-based tools (such as those offered by Google Cloud Platform, Amazon Web Services and dozens of others).
THE DATA ROADMAP FOR ECOMMERCE BUSINESSES
What does ‘leveraging first party data’ look like in practice?
The process starts with measuring customer lifetime value and customer segments – to understand how they relate to marketing activities.
But this type of deep-dive customer analysis doesn’t have to be limited to the realm of data engineers and data scientists. End users (ecommerce directors, heads of marketing, CEO’s, founders, etc.) can achieve this simply by being provided with automated reports that surface the relevant data and growth metrics.
Such reports are built on a structured datasets – customer profiles – in ways that drive insight.
The process ends with pushing audience data to go-to-market platforms to improve targeting and optimisation returns. This takes data out of the realm of pure analysis and into the operations of a business.
We’re seeing data increasingly moving away from the major tech platforms as brands seek to leverage their own assets – part of the movement I call “1st Party Marketing”. Businesses that build their own data pipelines will have the competitive advantage.
Success isn’t achieved by outhustling the competition. It’s done by leveraging the assets that brands already own (their data), rendering competition irrelevant.
Our managed data stack services help to set up modern data stacks, automate reports and operationalise data so brands can 10x the value of their data without 10x’ing their time.