How customer identity solutions slash churn — and boost revenue
Columnist Mike Sands explains how the right customer identity solution will help you tap into your customer data and build a long-term approach to customer engagement.
Recently, I spoke with a CMO in the retail sector who told me that about 50 percent of his customers buy once and then never buy again. And he knows that slicing that attrition rate by just one or two percentage points would drive millions of dollars to the bottom line.
This is a common challenge, not just for retailers, but for many brands. The long-term payoff of investing in existing customers is beyond dispute. What’s up for debate, however, is how to retain them.
To understand more about how marketers are prioritizing goals such as acquisition and retention, the metrics they’re focusing on, and how they want to move the needle this year, Signal (my employer) surveyed (registration required) a select group of CMOs from leading brands.
Here’s what we learned:
- Growing new customer acquisition is the No. 1 priority by far — topping the list for 74 percent of CMOs.
- Only 44 percent of CMOs rank loyalty and retention as a top priority.
- 44 percent of CMOs spend 30 percent to 50 percent of their budgets on retention and loyalty, while another 33 percent allocate just 10 percent to 30 percent to these objectives.
And here’s where it gets really interesting. The metrics CMOs are most unhappy with all have to do with customer loyalty and retention. Marketers in our survey claim they are unsatisfied or very unsatisfied with:
- customer retention rates — 61 percent
- customer lifetime value — 58 percent
- Net Promoter Scores — 53 percent
Clearly, there’s a huge disconnect between where marketers are investing their budgets and where they most need to improve. Most marketers aren’t doing enough to keep existing customers happy, resulting in churn, reduced loyalty and erosion of brand image.
Struggling to keep up with today’s always-on consumers, marketers are increasingly investing in acquisition to drive more customers in the door and replace the ones who don’t come back. This is a never-ending, hard-won cycle — and an expensive one, to boot: It costs a lot more to bring a new customer up to the level of profitability of a lost customer.
Of course, acquiring new customers will always be vital to a brand’s overall game plan. But conversion rates alone don’t create lifetime value. What does is investing in strategies that strengthen and maintain long-lasting, loyal relationships by offering genuine, valuable and contextually relevant experiences at critical moments in the customer life cycle.
The benefits of targeting your existing customers are priceless: Customers who are highly engaged with a brand make 90 percent more frequent purchases, spend 60 percent more in each transaction and are four times more likely to advocate the brand to colleagues and acquaintances.
Put your money where your mouth is
Poor customer experiences are a major cause of customer loss. The key to building superior brand engagements is the ability to identify and relate to customers as individuals across all the touch points where they interact with your brand — on the web, in a mobile app or in physical locations. As our CMO survey reveals, most marketers already know this.
- Customer identity, the ability to recognize the customer on a 1:1 basis across devices and channels, ranks as the most important asset to delivering personalized experiences across online and real-world touch points.
- 64 percent claim platforms that provide a single view of the customer are the most critical technology for more connected, relevant experiences.
Yet most B2C marketers still don’t have all the pieces in place to effectively resolve customer identity, according to the CMO study.
- Only 33 percent have integrated disparate platforms to create holistic customer profiles.
- Just 25 percent can combine historical data and real-time customer context across platforms.
- And a mere 20 percent say they are able to identify individuals in the moment across all touch points.
Many brands are still in the early stages of turning their fragmented data into a unified asset that is constantly being updated and continually available for customer recognition. The legacy tools and technologies they’re using for customer identity are typically hampered by latency and short-lived web cookies.
But thanks to the evolution of identity solutions, marketers have better ways to tap into the full potential of their customer data and actually connect acquisition and retention efforts. New approaches that use persistent identities take marketing beyond a single interaction or campaign, enabling a long-term approach to customer engagement and a consistent customer experience across channels that drives results.
For example, using customer data to target digital ads, marketers can engage customers with highly personalized, valuable and unique brand engagements at critical moments during the buyer journey. Looking beyond that first transaction and strategizing how and where to communicate during times of discovery, decision-making or post-purchase, brands can maintain an ongoing dialogue that fosters long-lasting relationships, reduces customer churn and drives increased lifetime value.
At the end of the day, only a certain portion of customers are going to be brand loyalists. But it’s a highly profitable portion: repeat customers spend 67 percent more than new ones. With a customer identity solution and a focus on the long term, brands can recognize who those customers are and craft immersive experiences that move them in the right direction.