The Most Under-Tapped Marketing Opportunity: Existing Customers

January 03, 2018

Note: A version of this post originally appeared in Forbes.

Call it “The Retail Apocalypse.” Call it “The Amazon Effect.” Call it what you will, but the facts are plain: the retail industry is in crisis.  Bankruptcies are skyrocketing, and Amazon is gobbling up market share and expanding capabilities at a nigh-unbelievable rate.

Some consider the current shakeout to be the culmination of traditional retailers’ failure to adapt to the growth of e-commerce, and that’s certainly not incorrect. But it goes deeper than that: this shakeout is the culmination of retailers’ failure to understand and obsess over their customers the way that Amazon has.

Success in today’s retail environment — in fact, in today’s business environment overall — requires intimate knowledge of and fanatical responsiveness to customers. There’s plenty of good reason for this. Stats vary depending on the source, but all agree that it costs as much as five to 10 times more to acquire new customers than to sell to recurring ones, and current customers spend up to 67 percent more on average than new customers.

Favoring acquisition over retention has never been the most efficient use of marketing spend. But it’s an even more dangerous game now than in years past. Brand loyalty has never been more important — and more in jeopardy — than it is today.

Just because a shopper purchases a product from a given brand doesn’t mean that the brand has a direct relationship with that consumer. Behemoths like Amazon and Facebook increasingly are intermediating the relationship with customers, creating weakened brand loyalty and interjecting added fragility into the customer relationship. After all, if a person buys a brand’s product on Amazon and returns there for a similar purchase at a later date, there’s nothing to keep Amazon from overtly recommending a competitor’s product over the original brand purchased (or even pushing one of Amazon’s own private-label lines). And if the customer’s relationship with Amazon is stronger than her relationship with the original brand, she’s highly likely to take that recommendation.

Brands today must continually strive for one-to-one connections with customers, and loyalty and retention marketing are more vital than ever in terms of driving revenue and profits. So why, given the inarguable higher value inherent in existing customers, are only 18 percent of companies more focused on retention versus acquisition marketing?

One reason is simple: until now, brands have lacked the tools for proper cross-channel retention and loyalty marketing. Most retention and loyalty marketing budget has gone into email and direct mail, the channels where existing customers are more comfortably and easily addressable. Given that one can only send so many emails and mailers, the vast majority of overall marketing budget has instead been spent on broader acquisition tactics across channels, including display. In these channels, many brands are treating their existing customers as though they are acquiring them for the first time — an incredibly inefficient use of ad dollars.

Breaking Out of Walled Gardens

To date, the big boys like Amazon, Facebook and Twitter — ensconced happily inside their walled gardens — have had a leg up on everyone else in terms of addressability. Each has technology that is adept at targeting known customers within the confines of its own platform. But for advertisers, reliance on addressability within walled gardens alone is not sufficient. To properly capitalize on the inherent value of existing customers, retention efforts must personalize customer experiences across the fuller online — and offline — experience.

Enter addressable programmatic media. Today, advertisers have the ability to identify and target their customers outside the walled gardens, bringing the efficiency and personalization of retention marketing to mass channels, at scale.

Taking advantage of this opportunity, however, requires a shift in thinking. Many advertisers are still focused on acquisition when it comes to their targeting tactics. They are accustomed to tailoring ads according to various demographic and behavioral criteria readily available in third-party data sets. But now, these ads can be tailored for the known customer, offering products and brand messaging known to appeal to the person based on a direct relationship with the customer. It’s the difference between offering a known outdoors-enthusiast prospect a deal on new hiking boots and offering a known outdoors-enthusiast customer a product guide to weatherproofing the hiking boots you know they already own.

Ultimately, it boils down to customer experience, an area where Amazon has been putting most brands to shame… until now, that is. Brands that leverage the new technological options at their disposal to expand retention and loyalty marketing efforts can reclaim and strengthen the customer relationship — not to mention heavily monetize it. For brands that seize this opportunity, the Retail Apocalypse will remain a clickbait ploy, and nothing more.

Mike Sands

Mike Sands is CEO and 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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