Swift Shifts in Marketing Spend Cannot Stem the Amazonian Tide

Note: A version of this post originally appeared in Marketing Land.

After decades of trying to fill a brand’s proverbial leaky bucket — continually flooding it with acquisition dollars instead of plugging the holes with retention spend — marketers are finally turning the tide.

According to a recent Gartner survey of CMOs, marketing leaders are now allocating two-thirds of their budgets toward customer retention and growth initiatives in an effort to boost lifetime values. That’s a drastic swing from last year, when the results of a CMO survey conducted by my company, Signal, revealed marketers were still spending three-quarters of marketing budgets on acquisition.

Why the sudden change? Because the disruptive wave of Amazon, the most valuable brand on the planet, continues to swell, leaving a demanding, fickle, experience-driven marketplace in its wake.

By leveraging every bit of customer data to innovate and deliver more valuable offerings, Amazon continually entices shoppers to come back and spend more — and brands that haven’t adopted customer-centric strategies are barely keeping afloat. Now, under increased pressure to prove budgets and results, marketers are revisiting the concept of customer lifetime value and pouring more into data analytics (this year’s top marketing expenditure, according to the Gartner survey) to increase satisfaction, retention and loyalty among the customers they already have.

Yet while marketers seem to be on the right track, what’s really going to be a brand’s lifesaver is identity. Analyzing customer data is one thing; turning it into a strategic asset is another. To create true competitive advantage, marketers need to unite all their customer data — online and off, past and present — into a single, everlasting and always-enriching record of behaviors, intents and desires.

For some of you, identity is still a buzzword. But for others, such as Netflix and Airbnb, it’s the foundation of their business. Increasingly, it’s what’s transforming legacy business models like Walmart and Ace Hardware into future-forward brands. And today it defines its own category in the Marketing Technology LUMAscape.

Granted, I understand identity’s complexity, and how much enterprise-wide coordination is needed to put in place the right technology solution, data strategy and skill sets. But for marketers who are not yet on board, what’s at stake is the fundamental ability to retain customers, grow those relationships and increase lifetime values.

Let me break it down.

Customer relationships are not hit-and-miss. Neither should be marketing.

As the underlying link between otherwise completely random events and interactions with a customer, identity provides the contextual relevancy necessary to understand and relate to consumers on a personal and continual basis.

Without a clear understanding of the customer, why she is interacting with a brand and what she is looking for, marketers can’t possibly create experiences that spur ongoing relationships. Not to mention that without any record of the customer’s previous behaviors and activities, marketers won’t have the context to know what attracted her in the first place. This is particularly significant for brands that offer lots of products or have multiple entry points for engagements.

Acquisition and retention may have separate budgets. But as strategies, they go hand in hand.

Traditionally, once brands acquire a new customer, they rely on owned channels to further the relationship. This, of course, has its limitations, often resulting in extraneous interactions that are more annoying than useful.

Customer identity technologies allow brands to connect their acquisition and retention initiatives by leveraging newly acquired first-party data across digital media. Rooting profiles in deterministic and persistent identifiers, marketers can keep pace and track customers as they move across channels and time. Brands can now strategize more significant, ongoing engagements at moments of discovery, decision, purchase and beyond, advancing relationships and, ultimately, increasing customer lifetime values.

Conversion rates don’t create high lifetime values. Delighted customers do.

As we all know, calculating customer lifetime value is tricky, and there is no perfect formula. But given that experience has replaced product as a brand’s key differentiator, this performance metric must take into account more than just transactions over lifetime. It must also consider the types of engagements, historical behaviors, influencer potential, even the value of customer feedback — none of which adds up without identity.

Identity allows marketers to discover and define their most valuable customers (whether that’s high-spenders, frequent-purchasers, longtime loyalists or something else) and make them more valuable, or even make more like them. Knowing the interests and behaviors of new and existing customers, marketers can determine the mix of media and engagements that drives particular individuals to spend more and use these insights to influence behaviors in their less profitable counterparts.

At a time when 40 percent of consumers have already shown a high willingness to jump ship and another 25 percent are developing a similar mindset, retaining and increasing the value of existing customers has never been more pivotal. Certainly, increasing marketing budget toward customer retention and growth strategies sets brands on a course for success. But only with identity can marketers truly stem the Amazonian tide.

Originally published March 27, 2018

Mike Sands

Mike Sands is a co-founder of Signal. Prior to joining Signal, Mike was part of the original Orbitz management team and held the positions of CMO and COO. Mike also has held management roles at General Motors Corporation and Leo Burnett. His work at General Motors led him to be named a “Marketer of the Next Generation” by Brandweek magazine. Mike holds a Bachelor of Science degree in Communications from Northwestern University and a Masters in Management degree from the J.L. Kellogg School of Management.

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