Improve customer retention with data and segmentation
Faced with the progressive withdrawal of third-party cookies, the digital marketing landscape is in the process of slowly remaking itself, refocusing decision-makers’ attention on customer retention.
This technological change, and the evolution of the legal context surrounding the protection of personal data, makes the creation of an adapted proprietary data strategy even more necessary than before. This strategy aims to reduce organizations’ dependence on media giants by improving the performance of their own channels.
In this context, the success of marketing strategies now more than ever before relies on the ability of companies to understand customer data and generate insights that will enable them to target audiences and prioritized initiatives based on their objectives.
This was the topic discussed by two Adviso specialists, Roger Kamena, lead data scientist and head of innovation, research and development, and Maxime Philippon, CRM Strategist, during a webinar held last month.
Here’s a summary of the main points of this presentation. Note also that the webinar remains available for viewing online.
Watch the webinar (in French only)
1. Retention as a lever for growth
With the paradigm shift that led to the withdrawal of third-party cookies, the use of proprietary data (zero-, first- and second-party data) will become indispensable to businesses in 2023, since these are the data that will enable adequate targeting of their audiences and personalization of their communications.
Testifying to this interest in the acquisition of proprietary data is this 2020 study by the Winterberry Group, which reveals that 60 percent of Canadian businesses plan to invest in the use of proprietary data to adapt to future changes.
With email addresses being the main identifier used to access online services, customer relationship management (CRM) and its primary channel, email, will become indispensable in a post-cookie world. Companies that excel at retaining their audiences will stand apart from the competition when it comes to customer value-creation.
What’s more, many surveys conducted amongst digital marketing professionals in North America and Europe highlight the importance of companies investing in their email channel in order to adapt to the disappearance of third-party cookies.
2. A well-segmented database: The foundation of all retention strategies
The effectiveness of targeting initiatives depends on segmentation. While it makes sense to personalize communications based on the diversity of customer profiles, prioritizing these initiatives without the necessary data is like taking a leap of faith, with all its attendant unforeseeable results.
To benefit from emailing, which can generate a return on investment of up to 40X, segmentation and personalization are indispensable.
With email, for example, segmentation and personalization of initiatives enable higher generation of revenue by recipient. Basically, it promotes the achievement of higher rates of engagement and conversion, as well as the more efficient delivery of email (with lower spam and unsubscribe rates).
To address a correctly positioned message at the right time that is likely to motivate purchase (or any other engagement), identifying and defining segments are prerequisites.
3. The continual segmentation process
To build efficient segmenting based on data, businesses must develop a continual iterative process that follows these main steps:
- Collect different types of data about customers: online and in-store transactions, behaviour during visits online, engagement marketing, data about the industry and competition that reveal market trends, data about products and services;
- Unify customer data, then process and clean them up as needed. Next, enrich profiles with relevant attributes based on business objectives (for example, the value of the average shopping cart, total number of transactions, the most-purchased product category, etc.);
- Target audiences by prioritizing segments that are the most promising (due to volume or business opportunities);
- Deliver these segments to activation channels such as email, websites or media platforms (particularly for retargeting initiatives or acquisition of prospects that share similar characteristics to your company’s current clientele);
- Analyze the results of marketing campaigns to improve segmentation.
The process of centralizing, unifying and delivering data may represent an operational challenge for companies without access to marketing technologies that enable a 360 view of their customers.
These operations may be realized using reverse ETL (which stands for “extract, transform, load”), a process enabling the copying of data to a central warehouse so that they can be synchronized with an operational data system (ERP, CRM, media platforms, etc.).
To learn more about this topic, take a look at our article about reverse ETL.
4. Segmentation models based on proprietary data (0, 1st, 2nd party)
To fulfill the needs of teams in marketing (and B2B sales), segmentation models must take into consideration the company’s objectives as well as the data available on customers. For this reason, every organization will have a unique data segmentation model.
A number of models have demonstrated the effectiveness at maximizing customer retention. To maximize the utility of a segmentation strategy, it’s important to combine a variety of models and adapt them to the needs of each business.
Here are a few examples of segmentation models:
- The RFM (recency, frequency, monetization) model is based on recency, purchase frequency (or engagement with the brand) and the monetary value associated with users. This model, which we present in greater detail in the webinar, also notably enables you to build groups of customers that are easily activated and organized based on their capacity to generate revenue for companies.
- LTV (lifetime value) segmentation groups customers based on an estimation of the profit they can generate in the long term, which is the entire duration of the business relationship with the company.
- Segmentation based on their stage in the purchase journey and behaviour (online and/or offline) is a model enabling customers to be targeted at the right time. It’s indispensable for guaranteeing messaging relevance.
- Demographic and/or psychographic segmentation, which is more popular, relies less on transactional data. It’s faster to execute, but on the other hand it generates less impact.
- Segmentation based on life events (birthday, wedding, buying a house, etc.) is an especially popular model when targeting media campaigns (for example, Facebook Meta). It’s ideal when combined with segmentation based on purchase journey and behaviour (as described in point 3).
- Instead of only being used during limited periods, seasonal customer segmentation can be reused at other times of the year for inciting new purchase behaviour in an audience.
- Models based on artificial intelligence and machine learning are perfectly adapted to the needs of mature companies that are aiming for excellence in personalization.
Segmentation strategies are unique to every business. It’s important to remember that your evolving thoughts on the matter must allow for the maximization of financial and human resource investments by companies.
All that remains is to (re)discover the model that works best for you, one that will allow you to forge lasting relationships with your communities in this post-cookie era, where customer retention has emerged as a determining factor in obtaining a competitive advantage.
To learn more about the benefits of successful segmentation, the different aspects of various models and the execution process for achieving customized segmentation for your business, watch our free video of the webinar “Improving customer retention through email marketing” (in French only).