Category: Marketing

Personalisation – 2

Zero-party data can improve personalisation which first-party data simply cannot.

Tim Ringel (Clickz): “Zero-party data is information willingly or even proactively shared by consumers with the brand. It might be in the form of surveys, loyalty programs, and preferences. They share it because they perceive value in that sharing… With zero-party data, marketers can now get consumers’ explicit consent to use their data and continue to create individualized experiences without sacrificing privacy. This will build a stronger long-term stronger relationship with consumers. But only if you give them a reason to consent… Once marketers can provide a solid incentive for consumers to willingly share their data, consumers will regain trust and reclaim ownership of their experiences. If you have consistent customers who enjoy your offerings, they are more likely to share their information. Moreover, they’re also more likely to be ambassadors of your brand.”

Zack Hamilton (Fast Company): “Customer-permissioned zero-party data is the catalyst to balancing data acquisition needs. It will also meet the privacy and compliance demands. This new strategy will require organizations to elevate data as an experience. New stakeholders have to get engaged. Cross-functional relationships between marketing, data science, legal, privacy, and compliance will become critical… Zero-party data will enable brands to increase customer trust and loyalty. Hyper-personalization will have positive business impact, including reducing customer acquisition costs (CAC) and increasing average order values (AOV) and customer lifetime value (CLTV).”

Vlad Gozman (Forbes): One of the key benefits of zero-party data is that it’s more trustworthy than third-party data. Because customers share it willingly and know that it’s being used by the brand, they’re more likely to trust the brand with their personal information. Another benefit of zero-party data is that it’s more accurate. Because customers supply it directly, there’s less opportunity for errors or inaccuracies. And finally, zero-party data is more engaging. Brands that use it can create more personalized customer experiences, which leads to higher engagement rates and longer customer lifespans. As consumers become increasingly privacy-aware, brands will need to rely more on zero-party data to create trusted, personalized relationships with their customers. Further, Apple’s move to block cross-app tracking and the trend of browsers toward tracking prevention may make traditional tracking models obsolete.”

The key to unlocking personalisation powered by zero-party data is by leveraging E2L2 (Email 2.0 and Loyalty 2.0). Email 2.0 enables interactivity and Loyalty 2.0 adds micro-incentives (Atomic Rewards) for actions. As I wrote in Loyalty 2.0: How Brands can Tokenise Customer Attention and Data: “Every customer is different. While segmentation is better than mass communication, what’s even better is hyper-personalisation. For this, brands need to aggregate data and then use AI-ML to discern patterns to recommend the next best action to customers. Data today is collected from actions done by customers on the brand’s communications (push messages) and properties (website and app). A trick that marketers have missed is the simplest one: asking customers directly. To make the collection of zero-party data (data volunteered by customers), two building blocks are needed: a hotline to ensure customers are paying attention and not ignoring incoming brand messages, and incentivises which reward them for their data. Data-driven thus means incentive-driven, asking the user to self-reveal both because subsequent interactions will become more targeted and because of the rewards earned in return…While [marketers] can decode actions of individual customers on the website and app, the better approach is to simply ask customers and incentivise their actions (in this case, the data being provided voluntarily). How many brands ask us? How many brands offer us incentives for giving information about ourselves? In this case, the additional benefit is that we will also benefit from the personalisation in the offers that we receive. We want to be shown opportunities that interest us, that speak to us. Revealing ourselves is both an opportunity to earn points and to ensure future communications are targeted for our particular tastes.”

2023 will be the year when personalisation fulfils its true promise and potential – powered by zero-party data collection in interactive and incentivised emails.

Personalisation – 1

As customers, we love content and experiences curated just for us.  And yet, there is a big gap in what brands offer. What’s missing is the data and analytics which are at the heart of crafting unique experiences for every customer.

Brian Carlson (CDP.com): “Data-driven marketers will embrace data and analytics as a foundational step to identify opportunities and create operational efficiencies. They examine the full customer lifecycle, focusing on areas where the most value is found. Data-driven marketers also leverage customer segments and microsegments, and will factor in data like behavioral, transactional, and engagement trends into their strategy… Personalization-ready marketers will invest in technology solutions that have activation capabilities and advanced analytics. Data-driven marketers should plan to develop scalable content and AI-driven functionality so they can respond to customers’ needs in real time.”

Blake Morgan (Forbes): “The shopping experience of the future will be personalized and technology-driven. Customers will be able to see items instantly, try them on and test them virtually, and have them customized to their exact preferences. The shopping experience will seamlessly move between the physical and digital worlds to give customers exactly what they want when they want it… Technology will be everywhere and make it possible for companies to automate the mundane parts of customer experience while also increasing and scaling their personalization efforts. It will be a fine balance between the two sides: customers want technology to make the experience smoother and more convenient, but they also want personalization. Companies will have to find the balance between automating and innovating with technology like AI, VR and connected IoT devices while also adding a human touch.”

Esat Artug (Ninetailed): “Personalized experiences are becoming an important part of the customer journey in this fast-paced change. Brands that successfully meet personalization demands will be handsomely rewarded with increased loyalty and greater revenue in the years ahead. Because the more consumers interact with a company in a more personalized way, the more likely they are to buy from that company again…Investing in customer data and analytics foundations will give businesses the ability to collect, cleanse, and unify data from various sources. This will provide a complete view of the customer journey, which is essential for personalization. Additionally, businesses need to be able to quickly process this data and create actionable insights in order to make real-time decisions. Building up agile capabilities will allow businesses to move quickly and efficiently to implement these decisions.”

Data is central to personalisation. While much of the focus has been on what marketers can glean about their customers using first-party data, I think 2023 will herald a big shift towards zero-party data.

Profitability

With easy financing drying, profitability is the key driver for businesses. Marketers have so far not been burdened with driving profitable growth – their task has been to grow the topline. Most have taken the easy path of pouring money on new customer acquisition via Big Adtech. As consumer spending slows in 2023 due to the twin effects of rising inflation and interest rates, CEOs will expect their CMOs to think and act like CPOs (chief profitability officers). For this, marketers cannot just optimise ad spending or try and improve customer experience on the brand’s owned properties (website and app); they will need to look at the elephant room in the room – the 50% AdWaste in their marketing budgets which is the root cause of diminished profitability or rising losses.

AdWaste is happening on account of wrong acquisition and reacquisition. The former is about paying Big Adtech for a user who does not transact or uninstalls the app within days; the latter is about paying Big Adtech for remarketing to an existing customer who has become inactive and thus not responding to the brand’s communications. The top imperative for marketers in 2023 will be to identify this wasted spending and eliminate it – without impacting revenue growth.

Marketers need to begin by answering two questions:

MSR today for most brands is 10-15%. Earned Growth is probably negative. The objective needs to be to get both to 50% or higher. (Sidenote: for a discussion on Earned Growth, see Net Promoter 3.0.) Think of the sum of MSR and EG as the FAB (Free Ad Budgets) Score. The path to profitability needs a FAB Score of 100 or more. There are two tracks marketers need to push profitability: build hotlines using Email 2.0 and Loyalty 2.0, and improve experiences on their digital properties with a unified Martech 2.0 stack and create differentiation for Best customers with Velvet Rope Marketing. [For a longer discussion, see Digital Marketing and its Discontents and Disruptions.)  As I wrote in the essay: “Start by addressing the crux of the brand-customer relationship with Email 2.0 hotlines and move the conversion ever closer to customers. Loyalty 2.0 gamification tokens give marketers the ability to engineer shifts in user behaviour by redirecting the AdWaste spending towards Atomic Rewards. Martech 2.0’s unified stack ensures that the incoming traffic to the brand’s properties has a personalised experience high on relevance. A focus on Best Customers (for acquisition and retention) reduces AdWaste and increases revenues. Together, these innovations can double brand profits without an increase in marketing expenses.”

For many B2C/D2C brands, profitability had become an afterthought. This will change in 2023 with pressures from investors and consumers. The solution lies in looking onward to the AdWaste and then using obliquity to solve the problem by focusing not just at the extreme ends (ad spending optimisation and martech consolidation) but in the middle – converting 1-way push channels into 2-way hotlines. An E2L2 (Email 2.0 and Loyalty 2.0) implementation is the first step in the journey towards exponential forever profitable growth.

My Writings

Solving the $200 Billion AdWaste Problem: “Brands spend $400 billion a year on digital advertising. Most of this is spent on new customer acquisition. The biggest beneficiaries of the advertising spend are the Big AdTech firms like Google and Meta, and increasingly Amazon and Tiktok. Brands are in a competitive race to acquire new customers and Big AdTech acts as the gatekeepers to digital customers. Attention is auctioned as clicks cost increasingly more each year. For many brands, the CAC (customer acquisition cost) has been rising 40-50% annually. And yet, brands feel they have little or no choice but to continue spending because they have few alternatives to reach out to new digital customers. The result: brand profits are taking a hit, and Big AdTech amasses even more power with their profits…For martech companies, the $200 billion AdWaste can become the new pool of money which multiplies their TAM (total addressable market). Today, most martech companies play in the 10% spending pool (about $50 billion). Newer solutions can substantially expand the available market. But to do this, it is not about adding new features to the martech stack but about taking a very different approach with a fundamentally new insight: attention and data are upstream of transactions, and “Atomic Rewards” (micro-incentives) can help marketers get more attention and data. In other words, persuade marketers to pay their existing customers rather than Big AdTech.”

Digital Marketing and its Discontents and Disruptions: “Digital Marketing too is facing threats from two sides: new customer acquisition and existing customer retention. CAC (customer acquisition cost) has been rising rapidly while competition for a brand’s existing customers combined with attention recession is forcing marketers to offer discounts and coupons to lure them back. Both are hurting profitability and creating angst amongst business leaders: how to ensure continuing growth amidst these twin challenges of increasing costs and decreasing loyalty? … Digital marketing needs a disruption…This is marketing’s future. Earned Growth (a metric based on revenue growth from existing customers and new customers coming in via referrals) should be the North Star Metric for marketers. Email 2.0, Loyalty 2.0, Martech and Velvet Rope Marketing 2.0 are the four horsemen to lead marketers into this new world of exponential forever profitable growth.”

Even as marketers need to shift spending from adtech to martech, they also need to migrate from Martech 1.0 and Martech 2.0. Here is a chart that outlines the transition they need to do:

It is with this background that I think of 4PO – profitability, personalisation, predictions, progency and omnichannel – as the defining trend for martech in 2023. Profitability can only come about with the elimination of AdWaste, personalisation needs data, predictions will be driven by AI, progency combines product with agency-like services, and omnichannel is the hallmark of today’s customer.

Others

The Future of Commerce lists the 5 key marketing trends for 2023:

1. Hard times will mean hard facts for marketers
2. Customer obsession will prove the winning formula
3. Focus on quality data for customer personalization
4. Finding the right channel mix
5. Rethinking the martech stack

TechFunnel has 10 martech trends going into 2023:

1. The rise of zero-party data gathering
2. The need to become video-first
3. SSP and DSP (finally) coming together
4. No-code as the go-to for digital marketing
5. Holographic ads: the meeting of real with virtual
6. Multilingual marketing by design
7. App push notifications as a high-ROI conversion driver
8. The return of no-visual audio
9. Age of the “genuinfluencer”
10. The arrival of generation Alpha

This is McGaw’s list of trends:

1. The First-Party Data Revolution Continues
2. The Rise of the Self-Service Buyer
3. Rethink Marketing Attribution and Budgets
4. Flexible Tech Stacks with Trimmed Walled Gardens
5. The Convergence of Marketing, Sales, and Product Teams

Luma’s State of Digital Marketing 2022 writes: “First and foremost is that enterprises are focusing on first party data: capturing, managing and executing on their own data. Solutions such as CDPs, data clean rooms, and new identifiers and identity solutions have grown significantly. On the advertising side, we’ve seen an explosion of commerce media plus a reemergence of contextual advertising. An area that we’ve always felt has been under-invested is creative tech, and we are now seeing more interest in these solutions. Finally, the industry is moving to cohort-based targeting vs. one to one with solutions like Google’s Privacy Sandbox. The biggest challenge with the focus on first party data is that its a much smaller data set creating scaled addressability concerns.”

Salesforce’s State of Marketing provides a summary of its key findings:

Shopify’s Commerce Trends 2023 had this point on data:

One key point highlighted in Coeffcient Capital’s Consumer Trends 2023 report is the rising customer acquisition costs.

There is an expectation of a consumer spending slowdown in 2023 which in turn will impact digital advertising and marketing spends. Dentsu’s 2023 Global Ad Spend Forecasts writes: “While ad spend is still rising, the expected total ad spend for 2022 has been downgraded. Having already seen worse than expected results from global media giants like Alphabet, Meta, Spotify and Snap, the industry expects this trend to continue into 2023. However, the picture is not a clear case of ad spend falling everywhere. Some platforms like TikTok are growing in response to continued growth in usership and the comparatively new category Retail Media – ads within commerce platforms like Amazon – are also growing.”

Gartner

The complexity of martech solutions, the need for driving clear business outcomes, and the desire for integration has also been highlighted by Gartner in its 2022 Marketing Technology Survey in these three charts:

While some of the points mentioned by Scott Brinker and Gartner apply to B2B companies, the situation is not very different for B2C companies where the same “martech cancel culture” is rising thanks to the bloat of tools that marketers have to deal with now.

Scott Brinker

Scott Brinker has been one of martech’s earliest evangelists. I was introduced to the term “martech” in May 2014 by my colleague, Veer. We attended the first Martech conference hosted by Scott Brinker in Boston. Upon our return, we began Netcore’s journey into the world of martech, to complement its email and SMS businesses. In a recent interview, Scott Brinker spoke about the state of martech today:

Consolidation has defied the martech stack for a long time. It feels like we’re finally at a point where a variety of motivations are leading people to start to think about rationalising this. That’s why I think we’re starting to see a martech ‘cancel culture’ out there now.

…For a while, martech stacks were definitely getting out of control. It wouldn’t have been unusual to go into a company and find 60 apps in the stack. So yes, part of this consolidation or rationalisation is driven by people needing to simplify operations.

Even if they cut their apps in half, you still end up with a company of a decent size, such as mid-market and up, where it’s very unlikely just one product is doing everything for them. They are going to have multiple products and other elements across the business, such as the data layer, they’re going to need to connect to. That’s where we’re seeing that integration discussion: Consolidate down to what are the essential capabilities we need, eliminate some redundancy, but then with the things that remain, really make sure the choices and investments are going to integrate. How well they integrate is now a first-class consideration in that buying criteria.

…[Martech’s] always been 10 per cent about the tech, 90 per cent about people, training, the organisation and strategy. That stuff is hard and doesn’t change quickly. Many folks bought a bunch of tech and into its promise. Yet if you don’t have enough in the way of developing org capital to harness it, you’re just going to be able to tap into it well. The martech in theory could do these amazing things, but if I don’t have the people to orchestrate what we do with it, why am I paying for it at this point?

A slide from a presentation by Scott Brinker highlights the shift in Martech through the years:

Scott Brinker wrote about convergence and consolidation: “This 2nd Age of Martech is bringing significant improvements to marketing technology and operations on all three of these dimensions — commercial software, professional services, and custom software. While massive consolidation in the martech landscape has not yet materialized — and given current software dynamics in the cloud, it seems unlikely to shrink to a handful of vendors in this decade — we are seeing convergence in this 2nd Age of Martech. The industry is converging around platform ecosystems, where the lines between services and software and between custom and commercial are blurring into the cloud. This convergence is much more transformative than consolidation ever could be.”

Star Wars and 3PO

I had not watched the original Star Wars movies when they were released in the late 70s and 80s. I had also skipped the prequels. I did watch the last three movies released between 2015 and 2019. Because I did not watch the first 6 movies in the series, my appreciation was diminished. It was only recently that Abhishek (my son) and I watched all the 9 movies in the order of the events taking place – and I could then appreciate why the movies have a cult-like following. Our recent interest was triggered by the TV/OTT series Andor.  We like science fiction and have watched both “Foundation” and “The Expanse”. Space holds a special attraction for us. “Star Trek” was a favourite in my growing up years.

Investopedia writes about why the Star Wars movies are so popular:

The numbers for Star Wars testify to its astounding success. Love it or hate it, the Star Wars brand is one of the most successful around, right up there with the ones for most well-known corporations. While it is difficult to quantify and delineate the exact reasons for its enduring appeal, there are some common elements that it shares with all successful businesses.

Just like any other great film, much of the success of the Star Wars franchise is due to its story. On the surface, the Star Wars story premise is that of the classic conflict of good versus evil. Within this core-shell of a story; however, there are several interwoven themes and subplots. The Star Wars story is a mash-up of many dramatic, comic, and action motifs.

For example, there is the parable about the struggle for power between the Jedi underdog and the powerful Imperial army. Luke Skywalker’s relationship with his father traces a dramatic arc. His coming of age evokes wistfulness and resonates with adolescents. The Jedi lightsaber and the Death Star add fantasy and action.

MovieWeb writes: “The themes present in the Star Wars movies have long-lasting relevance. From the political disputes in the galaxy that resemble the state of the U.S. today to the importance of hope and courage and the age-old battle of good and evil, there are lessons within the all the movies that hold value and significance to audience members today, just as they did at the premiere in 1977. All of these elements combined make for an excellent batch of storytelling that transcends time. The galaxy far, far away has remained a quintessential piece of pop culture since its debut over 40 years ago and will likely continue intriguing audiences for generations to come.”

The Cold Wire adds: “People think that there are mottos built into the movie that are intended to be used in everyday life. Whether you believe this or not, there are certainly some things about life and fighting for what you want that will appeal to many people. Those who love Star Wars look quite deeply into the subtext of the movie to be able to use more and more of the wisdom in their daily lives.”

One of the enduring and endearing characters is the humanoid robot, C-3PO, introducing himself as responsible for “human-cyborg relations.” Star Wars Fandom explains: “C-3PO, sometimes [pronounced] See-Threepio and often referred to as Threepio, was a bipedal, humanoid protocol droid designed to interact with organics, programmed primarily for etiquette and protocol. He was fluent in over six million forms of communication, and developed a fussy and worry-prone personality throughout his many decades of operation.”

And so it was that when I started thinking about martech’s future and how it will evolve in 2023, I came up with 4PO: profitability, personalisation, predictions, progency and omnichannel. Before I get to my assessment of the times to come, let us first look at what others have to say.

12 Mantras, 12 Essays

I have put together 12 mantras for winning in the D2C business.

1. Identity: Build a 2-way interaction channel with your customers. Collect email ID and mobile number for every customer.
2. Hotlines: Use Email 2.0 (AMP for interactive messages) and Loyalty 2.0 (Atomic Rewards for incentivised messages) to ensure that the push messages sent get opened and acted on. Atomic Rewards can be used for a transaction upstream (attention and data) and downstream (ratings, reviews, and referrals).
3. Habits: Provide informative content daily to customers (after opt-in) so they get into the habit of acting on the messages sent.
4. AdWaste: Calculate the digital marketing budget that is being wasted on reacquisition and wrong acquisition. Redirect this towards Atomic Rewards. In other words, pay customers, not Big Adtech.
5. Audit: Do a customer-basis audit to understand buying behaviour of customers.
6. Best Customers: Using customer lifetime value as a marker, identify the top 20% customers.
7. Velvet Rope Marketing: Create differentiated experiences for Best Customers. These could be based on exclusivity, ease and access.
8. Unified Martech Stack: Go beyond point solutions and deploy an AI-powered Martech 2.0 stack across the properties (website, app) to automate routine tasks and provide omnichannel personalisation.
9. Search: Ensure that search results fully reflect the product catalog.
10. Referrals: Happy customers can bring in friends and family which means zero cost of acquisition.
11. Acquire Best Customers: Decode the Best Customer Genome and look for new customers like them – rather than focusing on a ‘spray and pray’ approach to acquisition.
12. Earned Growth: Make earned growth (revenue increase from existing customers and referrals) as the North Star Metric.

As you build the business, make profits and not valuation as the goal. Valuation, as we have seen in the past year, is ephemeral. A focus on profits ensures best practices are followed in business building. They are the best source of capital – because the only way to earn profits is by providing something of value to customers. The ideas described here are the keys to powering “exponential forever profitable growth.”

Many of the ideas have been expanded on in my writings on marketing. To go with the 12 mantras, here are 12 of the best essays:

1. Digital Marketing and its Discontents and Disruptions
2. Of Hotlines and Properties
3. Solving the $200 Billion AdWaste Problem
4. Velvet Rope Marketing
5. Best Customers and Velvet Rope Marketing
6. Email 2.0: Making Email Cool Again
7. Hotline: The Crux of the Brand-Customer Relationship
8. Building the Hotline Right
9. Reimagining the Email Footer
10. AMP’s Magic: Coming Soon to Your Email Inbox
11. Atomic Rewards: The Solution to Attention Recession
12. Loyalty 2.0: How Brands can Tokenise Customer Attention and Data

So, dear D2C founder, venture forth and build. But do it right. Eschew the path of raising lots of capital and burning it on customer acquisition. Remember the most fundamental of all business principles: “Bring your customer back for more, and ensure they get their friends.” Choose the path of profit-centric marketing, and build an enduring, great company.

Retention and Growth – 2

D2C Founder: Is there a framework which brings all these growth marketing ideas together?

Yes. And this is how it looks:

Hotline and Properties are at the heart of a D2C business. Marketplaces provide an initial sales channel, while acquisition needs to be targeted to minimise AdWaste.

Here are a couple of graphics which take a customer-centric view of the journey and the various interventions that marketers can make:

D2C Founder: How will I know if I am succeeding? Is there a North Star Metric?

While there are many numbers that can be tracked, the most important number is Earned Growth, which “is the accounting-based counterpart for the Net Promoter Score. It reinforces the effectiveness of NPS and provides the organizations that use it with a clear, data-driven connection between customer success, repeat and expanded purchases, word-of-mouth recommendations, a positive company culture, and business results.”

Here is an explainer in “Net Promoter 3.0” in Harvard Business Review: “Earned growth has two elements. The first is the back-for-more component captured by a battle-tested statistic called net revenue retention (NRR), which is used in several industries, most notably software-as-a-service (SaaS). Once you have organized revenues by customer, you can determine your NRR. Simply tally this year’s revenues from customers who were with you last year, divide that amount by last year’s total revenues, and express that figure as a percentage. The second component is earned new customers (ENC). It is the percentage of spending from new customers you’ve earned through referrals (as opposed to bought through promotional channels).  To determine your earned growth rate, add NRR and ENC together and then subtract 100%.”