The ecommerce industry is undoubtedly booming in the United States despite predictions that economic uncertainty would hinder consumer spending. In fact, a recent report estimated there were more than $300 billion in retail ecomm sales in Q3 2024 alone. With that success comes a highly competitive market filled with brands fighting to claim – and retain – market share. How they do that is becoming increasingly important.
Prioritizing Customer Lifetime Value
Understanding and maximizing customer lifetime value (LTV) is a crucial component of driving profitable growth. With advertising costs constantly climbing, we don’t want to just drive short-term sales. Instead, it’s imperative that brands identify and market to those who are most likely to generate a high revenue over the customer lifecycle.
In fact, rather than looking at lifetime value or customer acquisition cost (CAC) as standalone metrics, it is recommended to analyze the LTV:CAC ratio. This allows for a truer picture of how profitable a customer really is. We can nurture these valuable relationships by implementing highly personalized strategies designed to meet specific customer needs.
Identity-Based Marketing
Identity-based marketing simply means that we are tailoring marketing efforts based on individual (known) customer identities, preferences and behaviors. This level of personalization builds a deeper connection between the customer and the brand, leading to better loyalty and higher LTV. Not only does it allow you to speak directly to the customer with messaging, products and offers that resonate with them, but it also helps to build a long-term relationship with your customers and efficiently target and acquire more customers who are likely to deliver a high LTV.
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Capitalizing on the Power of AI
Marketers are bombarded with data every day. Fortunately, the days of manually sorting through spreadsheets are over. Implementing AI tools can be a game changer, and not just for creative development, allowing you to focus on making strategic data-centric business decisions that will boost your bottom line. Here are some practical examples of how AI, including predictive analytics, is driving identity-based marketing strategies:
Identifying Customer Personas: The process of identifying customer personas for your unique brand was once a tedious, costly process that took months upon months to complete and was based on a relatively small customer sample size. Fortunately, a strength of AI is being able to sort through data quickly and find similarities within the entirety of your customer base, not just a small subset. AI algorithms can now generate your brand’s top personas in minutes and provide you with detailed information like their demographics, behavior, interests and product preferences.
Understanding Customer Behavior: AI tools can help marketers anticipate future purchasing trends based on historical customer data. These predictions can help you determine if further investment in remarketing or discount strategies will ultimately result in higher LTV. Marketers no longer have to wait for an entire purchase cycle to see whether a campaign was effective in acquiring high LTV customers. They can access this information immediately and make quick adjustments to campaigns and strategy as needed.
Segmentation for Targeted Marketing: Segment and target high-value customers based on data like past purchases, customer decile and persona. This allows you to tailor marketing efforts, enhance engagement and optimize profitability.
Personalized Customer Experience: Personalization in marketing is no longer a bonus, it’s an expectation. Utilizing insights from predictive models, you can offer personalized product recommendations, loyalty discounts and experiences that make customers feel valued and understood.
Proactive Retention Strategies: Predictive signals can help marketers identify who their at-risk customers are and allow for timely interventions to retain them. This may include discount strategies or simply sending a reminder that items were left in a customer’s cart. Additionally, lapsed customers can be identified and placed into win-back campaigns, and current customers can receive perfectly timed messages when a customer is expected to purchase next.
Dynamic Pricing Models: Pricing strategies can prove to be an effective tool when maximizing revenue potential. AI models can help identify customers who are discount-sensitive, along with discount thresholds, so unnecessary price reductions can be avoided.
Cross-Channel Insights: Winning marketing strategies incorporate multiple touch points, including things like email, website, social media and mobile apps. AI capabilities can help aggregate and decipher all of this data for a more holistic view of customer behavior, identifying trends so you can optimize your marketing efforts, which is increasingly important in a time when content distribution becomes more challenging. Furthermore, AI can be used to identify which customer personas or segments have a higher propensity to purchase on specific platforms, so budget and targeting strategies can be refined.
Harnessing the power of your data used to be a painstakingly long process. Now, platforms supercharged with AI capabilities are making it possible for brands to analyze millions of data points about their customers within minutes so they can make timely business decisions that will positively impact profitability.
Cary Lawrence is the CEO of Decile, a customer data and analytics platform with a mission to help ecommerce brands grow profitably. Decile spun out of SocialCode in July 2020 where Lawrence was a Co-founder in 2010. Prior to SocialCode, she worked in the Ad Innovations group at Washington Post Digital and served as a Program Associate at the Aspen Institute in the Communications and Society Program and has roots in the agency world. Lawrence holds an M.A. in Communications, Culture, and Technology from Georgetown University and a B.S. in Business from Wake Forest University and taught Digital Analytics in Georgetown’s PR and Corporate Communications program.
