Retention Renaissance: Adapting to a Retention-Driven Marketplace


Ibby Syed

The 2020 and the Covid 19 pandemic saw a rise in consumer spending to record levels - stuck inside with nothing to do, Americans purchased from online vendors and explored new products with money they would have spent elsewhere. D2C brands thrived, and the consumer products sector saw an increase in VC funding for products that would keep the world’s attention indoors.

In addition to high consumer spending, the customer acquisition landscape was quite different from what it is today - platforms like Facebook, Twitter, and Instagram offered clever segmentation tactics to target customers effectively, which gave these companies comparatively lower customer acquisition cost (CAC) than they had seen in the past. I myself ran a data team at Peloton during the pandemic, and we saw our customer acquisition cost go to zero - we had turned off all acquisition channel spend because we had more demand than ever before.

2023 brings us a different world than we saw in 2020 and 2021, in two major ways - the first being the launch of iOS 14.5 in April of 2021, which greatly reduced the efficacy of platforms like Google and Facebook to accurately place advertisements for the right customers. Brands have seen “Return on Ad Spend” decline in the last year, showing us that the number of new customers that a brand can acquire for a given dollar has decreased. The second is the coming warning signs of a global recession, which has resulted in a proverbial “tightening of the belt” - consumer spending was down from 2021 to 2022, which special emphasis on discretionary spending in new categories:

This blog post has been a bit bleak so far, if I’m honest - but all is not lost! If you’ve been operating a business, you’ve got a plethora of data that you can use to your advantage. Here are some ways that our customers have seen growth from their existing customer base:

Keep your existing customers engaged

We won’t go into this too much, but one thing that has helped a number of our customers is to segment their customers into different lifecycle groups - if you drive the right sort of messaging to each customer’s proclivity to interact with your product, you can ensure that you don’t suffer from “marketing fatigue.” In other words, knowing what appeals to each of your individual customer personas will make sure you optimize your marketing content.

For example, a customer in your most loyal segment may not need special incentives or promotions to motivate them to keep purchasing from you. Instead, you want to keep them in the loop about new offerings, while recommending them products that they might love based on their past browsing or purchase behavior. A disinterested customer, however, who lies in a low-loyalty segment, may need more of an incentive to re-engage. Offering personalized promotions or discounts to give your customer that final nudge to commit to another purchase would likely be more effective than spamming them with offerings they truly don’t care about.

Cross sell to existing customers using AI

Everyone’s heard of ChatGPT, but an easy way to incorporate real, useful AI in your marketing is to ensure that you’re marketing new products to customers that are likely to buy them, and that you’re marketing products and categories that customers haven’t tried before in the right way. “Market Basket” analysis can help you solve the second one.

If you have a customer that only buys shoes from your brand, why pester them with emails about new offerings that have no relevance to their needs? Instead, you could implement a personalization algorithm to suggest arrivals of new shoe products, or even suggest alternate pieces of apparel with similar styles, materials, or designs to the shoes the customer has purchased in the past. Or, you could offer a promotional bundle to your customer - maybe a combination of a shoe you know they love and a product you think they would love.

Use data to improve CX

Identifying products and SKUs that are more likely to result in customer churn is a great way to figure out what to improve on - one of our customers who sells perishable food products found that a large portion of their customer churn could be attributed to sending products that melt quickly from a warehouse location far away from where most of them were delivered to (the northeast).

Most of the time, selling fewer, but higher quality products is better than trying to sell too many products trying to appeal to various segments. You’ll see that having too many products can dilute brand perception (our recent Nike article dives into this). Analyzing the raw data that comes with having an online distribution channel reveals a surprising amount of information about your customers’ behaviors, needs, and wants. And this information is critical when you’re making decisions about where to take your brand and your products next.

Again, don’t neglect the customers you already have when trying to grow your brand. More often than not, it’s much easier to derive more value out of existing customers than to try to grasp onto new ones. And that right there is exactly what Cotera can help you accomplish. We efficiently and effectively pull insights from your data so you know exactly how you can your improve customer experience, retention strategies, and upselling tactics. Even with a data team, this process can be intimidating and feel tedious - which is why you’ll find that automating it all is a worthy investment. And guess what? We’re here so you don’t have to do it alone.

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