As a result, it would be safe to assume that marketing budgets are reflecting this opportunity. Unfortunately, not. Marketing budgets have shrunk as businesses tighten their purse strings. The average share of a company’s revenue that’s spent on marketing declined to just over 6% in 2021. 

What is customer retention?

Customer retention is an important part of any successful business strategy. It involves building and maintaining positive relationships with your existing customers to keep them coming back. 

What is customer acquisition?

Customer acquisition is the process of acquiring new customers for your company. The goal of customer acquisition is to convert your customers into paying customers who will generate revenue for your company.

Customer acquisition or customer retention?

The rise of marketing opportunities online may make it feel like acquiring new customers and growing your marketing database is the answer to business growth. If there are more customers online looking to discover new brands, then you have a better chance of converting them, right? Not necessarily.  

While the acquisition is still a big priority for a lot of brands, competition is rife. You’re not the only brand to see the revenue opportunities offered by the new increased activity online. Brands like Google, Facebook, and TikTok want to keep users on their channels and clicking on revenue-generating paid ads rather than surfacing new brands organically.  

That means big brands with bigger budgets are the ones succeeding in converting customers. 

It’s also important to note that customer acquisition can be more costly and time-consuming than customer retention – so it’s good to focus on both strategies simultaneously.

The benefits of customer retention

Investing in customer retention is a smart move for any company looking to achieve long-term growth and success. Improving your customer retention has many benefits: 

Reduces rising customer acquisition costs

Research carried out by Profitwell found that customer acquisition costs (CAC) had increased by 60% in the half-decade from 2014 to 2019.  

During the recent pandemic, when online demand for goods first surged, ecommerce giants like Amazon and supermarkets ramped up their tactics, investing massively in paid search and delivery fulfillment. With 74% of online searches starting on Amazon nowadays, it’s been made nearly impossible for brands to compete with these industry leaders for new customer acquisitions.  

Lowers churn rate

When customers leave because they’re unhappy with their experience, it costs businesses money each time they lose one — not only because they have less revenue coming in but also because they have to spend money on marketing campaigns aimed at acquiring new leads (which usually don’t work as well as retaining existing ones).

How to improve customer retention

To retain customers, marketers need to shift their focus from acquisition to retention. The most effective way to do this is by using customer data. Customer data can be used for personalization, improving customer experience, and making data-driven decisions.

Harness your customer data to segment

Your data literally holds all the answers. Want to set your marketing team’s KPIs clearly? Check out your data. Want to know what products or services to develop? Your data will tell you. Want to know which customers are of the highest value? The answer is in your data.  

You can calculate your customer lifetime value (CLV) to help you increase sales and profit as well as boost customer loyalty. It can help identify segments that will generate the most revenue over time, enabling you to justify spending on your marketing campaigns. 

Thankfully, improved data capture, understanding of the importance of first-party data, and better access to predictive analytics tools mean that CLV can be forecast with greater accuracy.  

A great example of this is Dotdigital’s RFM customer modeling tool. By pulling in customer data from across your marketing stack, it intuitively groups customers based on the recency, frequency, and monetary value of their interactions with you. You can then build segments to target high-value and loyal customers or even customers who need nurturing.  

The end goal is to never let a customer go after you have invested in their initial acquisition.  

Whether through CLV, RFM, lead scoring, or NPS, you need to harness your customer data to target the right customer with the right message at the most optimal stage of their journey.  

Personalize your marketing for memorable experiences

Personalization is about more than addressing your email subscribers by their first names. Truly personalized messages and content take user behavior as they interact across your digital touchpoints into account, as do user preferences such as specific product recommendations, choices, and interests. 

This ensures that customers are seeing deals, promotions, and content that is relevant to them, on the channels, and at the frequency, they want to see it.  

Recent research found that customers are 80% more likely to make repeat purchases when brands create personalized experiences. These experiences can be anything from relevant product recommendations, to location-based updates. Overall, personalized communication on your website or in your email marketing campaigns can increase brand loyalty —particularly among millennials—by around 28%.  

Personalized experiences help you nurture your customer relationship by being useful, informative, and relevant to their specific stage in the journey. This will keep customers returning to your brand time and time again, leading to higher retention rates.

The long-term value of customer retention

Marketers must understand the long-term value of customer retention. Nurturing your existing customers is just as vital to your business’ success as acquiring new ones. Not only is it cost-effective, but the likelihood of converting an existing customer is 60–70%, whereas you only have a 5-20% chance of converting new prospects. 

The results will not be immediate, unlike measuring the growth of your marketing list. You need to ask yourself how you can improve the customer experience to keep customers coming back and turning into brand advocates. 

Calculating and tracking CLV and customer behavior will help you identify high-value segments and where you need to direct your marketing resources. In turn, this will ensure you’re getting a higher ROI for your marketing campaigns. Additionally, ongoing data analysis can help you identify trends and set clear KPIs for your marketing team.

Customers want and value personalized experiences. Using your customer data and intent signals, you can segment and target existing customers with experiences tailored to their needs and desires. With a strong core customer base of loyal customers, you will ultimately see customer acquisition rates improve, as they turn into brand advocates and spread the word about your business.  

We know that the customer experience is essential. So much so, that recent years have seen the number of companies with a Chief Experience Officer (CXO) or Chief Customer Officer (CCO) grow from less than 65% to 90%. The value of a good customer experience (CX) is widely acknowledged and fully accepted.  

But theories on how to achieve it are varied, conflicting, and ever-changing. Every year, we’re told about new tools that will help us create the experiences that will drive conversions, ROI, and retention.  

• SCV 
• DMP 
• CDP 
• AI 
• CRM 
• PWA 
• CMS 

The list is as long as it is endless. But one thing all of these buzzwords and tools have in common is data. 

What is customer data?

Whether you’re communicating with customers, businesses, donors, fundraisers, or your own internal members of staff, every organization has a wealth of data at its fingertips.  

Customer data is more than a simple email marketing contact. A contact’s email address is just one of many invaluable gems of data that businesses collect to better understand their audience. Customer data ranges from behavioral to demographic and personal information about them.  

Connecting your data

Today’s cross-channel customer can interact with your business anywhere, at any time, and on any device. You can send out surveys to collect data, build preference centers, and track browsing behavior. The ways you can collect data are vast and varied. As are the systems that house it.  

The data you collect can be housed in your email service provider, CRM, ecommerce store, CMS, and more. To gain quick and practical insights from your data, you need a tool that can pull them all together. 

What is a customer data platform (CDP)?

Today’s marketers are faced with a particular problem that affects every business, everywhere. Disparate data. To resolve this issue, we’re seeing more and more companies emerge referring to themselves as a CDP – but what is a CDP? 

A CDP – customer data platform – is a piece of software that brings together disparate and disconnected customer data into a single unified source. This allows for information to be easily shared and accessible to other systems which empower marketers to target customers with personalized and relevant marketing messages.  

As the internet enabled brands to flourish online, companies have collected more data from more sources than ever before. With all this big data, demand for a tool that can process multiple data sets and deliver actionable insights has grown. Similarly, the need to share data across teams and departments has increased.  

Compliance with data privacy regulations requires legal teams to easily access a customer’s personally identifiable information (PII). The need to deliver relevant marketing messages means that marketing teams need to be able to pull insights about customer behavior and preferences. Customer service agents need to access personal information in order to provide a personalized experience.  

CDPs have emerged as the answer to solve all our problems. But is this really the case? Are CDPs really the only customer data tool we’ll need in the future?  

Segmentation, automation, cross-channel

What are we really after when we talk about customer data tools?  

We’re after a single source of truth. Once place where everyone can get the answers to the burning questions stopping them from achieving their goal, objectives, and KPIs. 

When we strip that back, we’re looking for a platform that can consolidate multiple data sources, creating insights that will help us build experiences that convert and retain customers. As package software, it needs to play well with others, unify customer profiles, manage PII, and have open access to grow with your business and your marketing stack.

As marketers, we have three core areas of concern that must be considered when sourcing a new customer data tool. 

1. Segmentation

Segmentation is essential for marketers looking to deliver personalized experiences. Creating groups of customers based on common characteristics – i.e., segments – is an invaluable but underused marketing tactic.  

Customer data tools need to be able to highlight, categorize, and group customers based on their common traits. How often do they shop with you? When did they last engage with your email marketing? Are they a high-value customer with a large contract with your business or do they need nurturing?  

The quicker and more accurate these insights can be drawn, the timelier your marketing communications will be. Has a high potential customer abandoned completing a price request form? You will be able to retarget them with a personalized and relevant message that will drive conversions.  

When considering which customer data tool to buy, these customer and segment insights should be at the top of your consideration list.

2. Automation

Automation, much like segmentation, is essential for marketers in every sector and every vertical. Marketing automation uses triggers to deliver messages in a timely and relevant fashion. These triggers can be any touchpoint across the customer journey; they could be date-driven (birthdays, anniversaries), behavior-based (abandoned carts, abandoned browse, page views), demographic (location, job title), and so much more.  

A customer data tool will be able to process these actions, identify customer intent, and enable marketers to send timely automated messages. You’ll never miss a conversion and retention-building opportunity again.

3. Cross-channel capabilities

As well as segmenting your audience and automation your messages, you need to be able to extend your reach. Today, customers are unpredictable. They can change devices and channels at any point along the customer journey. Cross-channel marketing enables you to manage multiple channels under one roof. No matter where the customer is, whether that’s geographically or in their individual customer journey, having cross-channel capabilities means you will always be able to connect with your customers. 

You need a customer data tool that can follow customers across their channel of choice, deliver messages – be it automated or single sends – and return actionable insight into customer behavior on each channel you offer.  

Choosing a customer data tool

The types of tools, systems, and software you can use to connect your data are varied but one thing is certain: it needs to work for your audience.  

As marketers, your job is to create customer experiences that engage, convert, and retain customers for the long haul. To do this, you need a data-driven marketing tool that can do it all; connect with customers on any channel, deliver insights you need to create a personal and relevant message, and help you target the right customer every time.  

Constant disruption has created new challenges for leadership teams. How can you create an effective and efficient marketing strategy when you don’t know where the next obstacle will come from?  

The only constant is change. The physical and digital marketing worlds will continue to evolve. Hybrid and virtual worlds will become more commonplace, giving you even more ways to connect with your audience. Your customer behavior will adapt, favoring new channels and content. 

You and your marketing team need to be well-tuned into the changing landscape. Agility has been a defining characteristic for marketers for many years, but 2023 will be the year you really need it to thrive.

Top 5 marketing trends for 2023 

To help you prepare for the new year, we’ve been doing the research so you don’t have to. Looking at everything from marketing tech to the customer experience, these five trends are our top marketing predictions for 2023.  

1. Marketers will be tasked with proving ROI from customer experience investment

As marketers, you’re well aware of the importance of a good customer experience (CX). It can make or break your business. It’s the decision-making factor that determines whether a customer will do business with you or not. Getting it right is essential.  

But as marketing budgets face more scrutiny than ever from CFOs and Finance departments, demonstrating the ROI of your CX is crucial.

How do you prove marketing ROI? 

Forrester estimates that 54% of marketers are unable to prove the ROI of their CX projects. That’s not good at all. Being unable to demonstrate the ROI of your campaigns will result in budgets being slashed in favor of projects that can measure their return on investment. 

So, how do you measure ROI?  

At the end of the day, being able to measure your ROI boils down to the capabilities of your martech stack. More specifically, your marketing automation or customer engagement platform.  

Platforms like Dotdigital offer marketers insights like multitouch revenue attribution, so you can measure the effectiveness of your entire marketing campaign – not just the beginning or end.  

This enables you to understand what elements in the customer journey are generating the most revenue. Combine that with good data management strategies to optimize your social ad spend and you’re well on your way to earning larger budgets and increasing investment in your marketing tech.  

2. The gap between insight and marketing action will continue to shrink

Demand for growth is only going to increase as we fall deeper into economic uncertainty. In order to grow, you need to be generating more leads and these leads need to be converting. Similarly, retaining these converted leads will guarantee a consistent flow of revenue. To grow and retain your customer base, you need to focus your attention on the customer lifecycle. 

You need to understand what motivates customers; what content they engage with and what drives them into action. These insights will be invaluable to your business. They’ll give your marketing strategy direction supported by facts and data.  

86% of marketing leaders agree that eliminating silos is critical to expanding the use of data and analytics in decision-making. Over the course of 2022, data unification platforms have been touted as the solution to this problem. In 2023, these data unification tools will only grow in importance

Why is data unification important? 

Data unification tools bring together disparate and disconnected data into a single, unified source.  

Customer data may come to you via multiple routes. For example, you may collect customer emails using your point of sale (POS) software, or gather data through visitors logging into your venue’s Wi-Fi. A data-centric platform like Dotdigital will unify these sources to create a single customer profile where you can access all important insights.  

But that isn’t enough. Insight needs to be turned into action.  

Customer analytics will help you make informed marketing decisions. On which channel are customers engaging with your content? What content or campaigns are they engaging with? What is their average order value?  

Customer behavior is constantly changing. In 2023, software that bridges the gap between insights and action will help you turn leads into conversions.

3. User-generated content will grow in importance to marketing strategies 

Customer behavior isn’t the only thing that’s constantly changing, and so is your audience demographic. Gen Z, the first generation of “digital natives” is entering the workforce. They’re evolving; changing the game for B2B and B2C businesses alike.  

Gen Z uses Instagram almost as often as they do Google. They don’t browse the internet as much as those aged 25 and over, in fact, since 2018 using the number of people using the internet to generally browse the web has dropped by 14%. Instead, they head to platforms like Instagram and TikTok for inspiration.  

We can speculate as to the many reasons why Gen Z are turning away from the internet, but market research suggests anxiety and mistrust could be behind the decline. Information overload is all too real, for Gen Z, it turns out that seeing is believing. 

Why is user-generated content important? 

User-generated content (UGC) is the content of any form (e.g., blogs, videos, pictures, etc.) created by people, rather than brands. Since 2020 there has been an 11% decline in consumer trust in online reviews. This distrust is even higher amongst younger people.  

Instead, they’re more likely to turn to social media to get reviews from real people. Enter the influencer. 

For marketers to connect with the growing Gen Z demographic, it’s vital you have a strong presence on social media. Making connections with influencers in your field will help you cut through the noise and gain the trust of your audience. Being real and authentic, supporting the creation of UGC, and adding it to your marketing strategy will help you expand your reach significantly in 2023. 

4. Brands will be expected to be more human

One of the biggest ongoing challenges marketers face is differentiating their brands from their competitors. This is especially relevant as we enter a time of economic uncertainty.  

You need to demonstrate the value your brand has to offer. Unfortunately, value comes in many ways shapes, and forms. But the biggest value you can offer customers is simple: treat them like human beings.

That means personalizing your marketing, protecting data privacy, and utilizing your channels to demonstrate the humans behind your business.

Experiences impact trust 

During difficult times, customers choose brands they trust over those they don’t know. The more work you put in early the more benefits you will reap.  

Data privacy experiences impact customer trust. 43% of customers will switch allegiances to another brand if they do not feel as though their privacy is being respected. When collecting customer data, it’s important you explain openly and honestly why you need it.  

Once these expectations are set, you then have to meet them. That means using customer data to deliver personalized experiences.  

Whether you work in the ecommerce, B2B, or NFP sectors, everyone wants to be treated like an individual.

5. Consumers will demand and expect brands to be greener

According to Forrester’s research, the number of “active green” consumers in Europe will increase by 50% by the end of 2023.  

By now, you should be well aware that the environment is a huge concern for the public. It’s more than just a PR stunt. With nearly three in five consumers willing to pay more for eco-friendly products, being the greener choice can actually improve your bottom line.

How to ‘go green’? 

There’s no simple formula that will help your business ‘go green’ or reach carbon-neutral status – you’ve got to work at it.  

Here at Dotdigital, before we became the world’s first carbon-neutral marketing automation platform, we set about evaluating every element of our business, from how we host our servers to how we heat our offices. It was not easy, but it was necessary to achieve our sustainability goals.  

When making the switch to sustainable business practices, it’s important you do the research. Greenwashing, or making sweeping statements about offsetting your environmental impact won’t cut it with today’s conscious consumer. You need to be open, honest, and accountable.  

At the same time, you need to balance customer demands for greener business practices with their demand for convenience. Retail giants Amazon have launched a fleet of electric vehicles to help reduce their impact on the environment, whilst still meeting demands for two-day shipping.  

Now, we know that many businesses out there will not be able to purchase a fleet of electric vans, but smaller businesses like Cult Beauty offer ‘eco delivery’ as a shipping option. This allows your customer to pick their journey and their impact.