Retention Re-engineering: Random to Recurring Revenues

Published August 17-28, 2024

Reinvention

Retention and growth of existing customers should be the top priorities for modern marketers. However, over the past decade, the focus has shifted disproportionately towards new customer acquisition and reacquisition of lapsed customers. This shift has led to an explosion in marketing budgets, driven by relentless bidding wars on adtech platforms. Today, adtech (customer acquisition) spending accounts for over 80% of marketing budgets, with a meagre 10% allocated to martech (customer engagement) and the remaining 10% to branding.

The hidden truth is that nearly half of the adtech budget is wasted due to misguided acquisition and reacquisition efforts. Marketers need to strike a balance between adtech and martech spending, but the lack of innovation in communication channels and martech platforms has perpetuated the skew towards adtech. Adtech is seen as a more reliable driver of consistent revenue growth compared to martech. This imbalance has resulted in low customer lifetime value (LTV) coupled with high customer acquisition costs (CAC), creating a profit squeeze for digital businesses. The promise of retention and growth marketing to enhance profitability has remained largely unfulfilled—until now.

Five groundbreaking innovations promise to revolutionise retention. These innovations go beyond traditional marketing; they will fundamentally re-engineer how marketers approach and implement retention strategies, and break the barriers between brands and their customers.

Agentic AI and the Co-Marketer: Agentic AI will power a marketer’s companion, the Co-Marketer, transforming how marketing tasks are executed. The Co-Marketer can create personalised content at scale, driving engagement and retention like never before.
Digital Twins for Segments and Individuals: Digital twins will enable marketers to simulate and predict customer behaviour, facilitating better next-best actions and enhancing customer experiences.
AI-Powered Large Customer Models: Customer Data Platforms (CDPs) will evolve into AI-powered Large Customer Models, integrating data from both the brand’s own properties and external sources. This holistic view will drive more accurate and personalised marketing efforts.
Epps (Email Apps) and ActionAds: Epps will transform passive, one-way emails into interactive, two-way communication channels, facilitating in-channel conversions and eliminating the friction of redirecting customers out of their inboxes. ActionAds will unlock new revenue streams by embedding actionable elements directly within the email, resulting in higher response rates.
Bundled Kaizen Services: Martech platforms will evolve to offer “service as software,” where human expertise and AI collaborate to deliver continuous improvements. This approach will bridge the gap between platform capabilities and marketer usage, ensuring that marketing strategies are always at the cutting edge of innovation.

These innovations will help marketers anticipate customer intent with N=1 hyper-personalisation and influence actions through effective engagement strategies. They will address the challenge of attention recession by establishing direct communication hotlines with customers, thereby maximising customer LTV and reducing AdWaste. The combined effect of increasing LTV and decreasing CAC will significantly enhance profitability.

Marketers will finally be able to achieve their dream of converting sporadic, random purchases into predictable, recurring revenues. Digital twins for every customer will guide marketers on emerging interests and demands, while the Co-Marketer will craft custom content for persuasion at scale. Agentic AI will enable a “department of one” to cater to a “segment of one,” making hyper-personalised marketing and constantly adapting “generative journeys” a reality.

This next-generation martech, combined with innovative email strategies and advanced services, will equip marketers with the tools to drastically reduce AdWaste and embark on a Profipoly Quest – achieving exponential forever profitable growth. This will mark the most significant shift in marketing since the advent of adtech. Retention marketing – retention re-engineering – will finally claim its rightful place at the forefront of marketing strategies.

These are themes I have discussed in my previous marketing essays. In this essay, I will discuss the evolution of retention marketing and provide a roadmap to re-engineering it for the future.

Review – 1

Netcore recently published its “Ecommerce Mindscape” report focused on India. Here are 5 key pointers (with assistance from Claude and ChatGPT):

Shift in Marketing Budgets and Mindset: There’s a significant disparity between acquisition and retention marketing budgets, with acquisition traditionally receiving the majority of resources. However, there’s a growing recognition of the need to rebalance these expenditures to focus more on retention strategies for sustainable growth and profitability. This shift reflects a changing mindset in marketing philosophy from a predominantly acquisition-focused approach to one that places greater emphasis on retention.

Impact of Customer Lifetime Value (LTV): The report emphasizes the importance of Customer Lifetime Value. Effective retention strategies are correlated with higher LTV, which in turn boosts overall profitability. This focus involves improving customer retention rates and deepening customer relationships over time, aligning closely with retention marketing objectives.

Data-Driven and Technology-Enabled Retention Strategies: The importance of leveraging customer data for effective retention marketing is paramount. Utilizing Customer Data Platforms (CDPs), cloud data warehouses, and advanced analytics enables deeper insights into customer behavior and preferences. Emerging technologies such as AI, machine learning, and advanced analytics are transforming retention marketing, enabling hyper-personalization, predictive analytics, and automated customer engagement.

Composable Martech Stacks and Integration: The concept of composability in martech stacks allows for more flexible and integrated retention marketing solutions. This approach enables marketers to combine best-of-breed tools for various aspects of retention marketing, such as personalization, customer engagement, and loyalty programs. There’s a need for better integration of various martech tools to create a more cohesive retention marketing ecosystem.

Cross-Channel Customer Engagement and Personalization: Consumer behavior is increasingly favoring brands that offer personalized and engaging experiences across all touchpoints. This approach enables consistent, personalized interactions that help maintain and strengthen customer relationships across various channels. Advanced data analytics and AI technologies are enabling more sophisticated personalization strategies at scale.

Retention as a Driver of Long-Term Growth: The report highlights the long-term benefits of retention marketing, including improved customer loyalty, reduced churn rates, and sustainable revenue growth. Companies that invest in robust retention strategies are better positioned to achieve steady, long-term growth compared to those that focus predominantly on acquisition.

Measuring Retention Marketing ROI: With increased focus on retention, there’s a growing need for better metrics and analytics to measure the ROI of retention marketing efforts. This includes developing more sophisticated ways to attribute value to retention activities and their impact on overall business performance.

Adapting to Privacy Concerns and Evolving Landscape: As data becomes increasingly crucial for retention marketing, addressing privacy concerns and adhering to data protection regulations becomes more important. The rapidly evolving martech landscape requires marketers to continuously update their skills and adapt their retention strategies to stay competitive.

Review – 2

Braze: “Customer retention is when businesses are able to keep—or retain—the customers they’ve acquired actively engaging with their brand…Brands utilize customer retention marketing campaigns to get lapsing or inactive customers to re-engage. These campaigns can be deployed across channels to encourage repeat website visits, app sessions, and purchases as well as subscription and membership renewals. When email, SMS, and push notification subscribers no longer open or click on campaigns as frequently as they once did or stop engaging altogether, these are signals of churn, and prime opportunities for brands to intervene with well-timed customer retention marketing campaigns that drive opens, clicks, and conversions. Customer retention marketing is important because it fosters sustainable growth for businesses and helps keep marketing costs in check. That’s because it’s more costly to acquire new customers than to get existing customers to make repeat purchases—6-7X more expensive. In addition to yielding cost savings, well-designed customer retention marketing efforts help brands boost critical KPIs, such as conversions, purchases, profits, customer lifetimes, and customer lifetime value.”

Twilio Sendgrid: “Retention marketing is the strategies and tactics you use to nurture and maintain your relationships with customers. Ecommerce isn’t the only industry doing it, either—everyone from big-time enterprises to mom-and-pop shops does it to keep customers coming back for more. For example, when Uber sends you a push notification with a $5 coupon, it’s hitting you with a retention marketing strategy. And when your local pizza joint invites you back with a text message for a buy-one-get-one pie, it’s using retention marketing. Retention marketing tactics could include other activities, such as: warm welcome emails with additional resources or tips that help your recipients with the onboarding workflow, exclusive VIP offers for loyal and consistent users or customers, loyalty programs that reward customers for spending more, Regular newsletters that include a combination of educational content and promotional pieces, reengagement emails with links to your preference center to allow recipients to customize their email frequency.”

BigCommerce: “Did you know that repeat customers are responsible for 40% of a store’s revenue? And what’s even more mind-blowing, is that a 40% share of overall revenue is generated by only 8% of customers. Your most loyal customers. If this is the case, why are so many brands still focused on customer acquisition? Think about it. Brands spend thousands of dollars each month on Google Adwords, Facebook, Instagram, you name it. In fact, according to Profit Well, the overall customer acquisition cost has risen almost 50% over the last five years. At the end of the day, those dollars really add up, eating away at profit margins. The most successful brands are making customer retention a priority – because they know that the customers they already have are the ones that make them a sustainable, thriving business.”

White Fox Head: “In the dynamic world of B2C, brands are constantly seeking innovative ways to retain customers and ensure steady revenue streams. Enter the subscription model — a strategy that promises recurring revenue, customer loyalty, and a wealth of data. From monthly beauty boxes to streaming services, subscriptions are reshaping the B2C landscape. The subscription model offers a win-win for both brands and consumers. Brands enjoy predictable revenue, while consumers benefit from convenience, cost savings, and continuous value.”

Review – 3

Exchange4Media: “Retention marketing leverages the foundation of trust and satisfaction built with current customers. By focusing on existing relationships, brands optimise their marketing efforts, tailoring their messages and offers to those who are already familiar with and fond of their brand. According to marketers, this approach is not just cost-effective but also deeply impactful, as satisfied customers often turn into brand advocates, furthering the reach and credibility of the brand organically…The buzz around retention marketing isn’t solely due to the rising costs of customer acquisition—there’s more to its appeal. Beyond just a reactive measure to economic pressures, retention marketing represents a proactive strategy with substantial rewards. As brands are struggling with the high stakes of acquiring new customers, the potential of retention marketing to generate higher returns with lower investment is becoming increasingly evident.”

Deepak Singh writes on LinkedIn that Retention is widely regarded as the hardest metric to move for product managers. To master retention, it’s crucial to go beyond theoretical understanding and examine in-depth case studies. His suggestions: Duolingo successfully utilized leaderboards, streaks, and notifications to boost retention, Google Play and Pinduoduo leveraged gaming and gamification, Amazon Prime’s loyalty program has had great success, and Spotify’s focus on playlists significantly improved retention and monetisation.

From one of my essays (Extreme Retention = Profit-centric Marketing) a few years ago: “B2C/D2C Businesses are hurting with rising CAC, increasing discounts, attention recession and data poverty. All these are driving them to keep spending increasingly larger parts of their marketing budgets on adtech (new acquisition). Half of the money being spent on adtech is being wasted (“AdWaste”) because of reacquisition (of inactive customers) and wrong acquisition (of customers who churn quickly). The focus on adtech has resulted in many profit killers. These spends and the focus on growth-at-all-costs is hurting profitability. What businesses need is a framework for profit-centric marketing, with profit creators. This can only come from existing customers – combining retention, repetition, referrals, reactivation (as opposed to reacquisition) and replenishment (targeted new acquisition). This 5R focus needs the 4P framework: pipes, partitioning, properties, and prospecting…Existing martech platforms tend to be focused more on features than on outcomes. They do not factor in the power law of marketing: 20% customers generate 60% of revenue and deliver 200% of profits. What marketers need to do is to therefore go beyond retention (of all) to extreme retention (of few)…In short: better experiences for better customers.”

From another of my essays (Hotline: The Crux of the Brand-Customer Relationship): “Building the hotline with existing customers is the only way brands can get their attention and solve for data. It is one of two ways to bring customers back to the properties (app and website) – the second method being big spends on branding. The hotline is the trick marketers have missed in the two other obsessions – new customer acquisition and adding bells and whistles to the app and website.”

Recap

I asked Claude and ChatGPT to provide a history of retention marketing. Here is the merged summary.

Retention marketing, the practice of focusing on keeping existing customers rather than solely acquiring new ones, has evolved significantly over the past century, particularly in the B2C (Business-to-Consumer) and D2C (Direct-to-Consumer) sectors. Its history is marked by the interplay of technological advancements, evolving consumer behaviors, and the increasing importance of customer lifetime value (LTV).

Early Beginnings: Personal Relationships and Mail-Order Catalogs

The concept of customer retention can be traced back to the early 20th century when local businesses relied heavily on personal relationships and reputation to maintain their customer base. Shopkeepers knew their customers by name, remembered their preferences, and offered personalized service – the earliest form of retention marketing. This era was characterized by manual efforts and direct interactions, with small businesses thriving on customer loyalty fostered through personalized service and community ties.

The late 19th and early 20th centuries saw the advent of mail-order catalogs, marking the first significant shift in retention marketing. This innovation allowed businesses to maintain relationships with customers over long distances, expanding their reach beyond local communities.

The Rise of Mass Marketing and Loyalty Programs

The 1950s and 1960s witnessed the rise of mass marketing and consumerism, driven by television, radio, and print advertising. While these channels were effective for customer acquisition, they offered limited tools for personalized retention efforts. The focus shifted towards reaching larger audiences, but some companies began to recognize the value of customer loyalty.

A significant milestone in structured retention marketing came in 1981 when American Airlines launched the first modern frequent flyer program, AAdvantage. This marked the beginning of a new era in customer loyalty initiatives. Throughout the 1980s and early 1990s, loyalty programs proliferated across various industries. Supermarkets introduced loyalty cards, and credit card companies offered rewards points. These programs aimed to incentivize repeat purchases and gather customer data, providing a blueprint for other sectors and emphasizing the value of repeat customers.

The Digital Revolution: E-commerce and CRM

The late 1990s brought the dot-com boom and the rise of e-commerce, transforming how businesses interacted with customers. This digital revolution provided online retailers with access to vast amounts of customer data, enabling more sophisticated retention strategies. Amazon, founded in 1994, quickly became a pioneer in online personalization and recommendation engines, setting new standards for customer retention in the digital age.

The 2000s saw the emergence of Customer Relationship Management (CRM) systems, allowing businesses to track and analyze customer interactions and data throughout the customer lifecycle. This technology enabled more sophisticated retention strategies, including targeted email marketing and personalized offers. Email marketing emerged as a powerful tool, allowing businesses to send targeted messages to their customer base. Early adopters of email marketing saw impressive results, highlighting the potential of digital retention strategies.

Social Media and Customer Engagement

The rise of social media in the late 2000s and early 2010s opened new channels for customer engagement and retention. Platforms like Facebook, Twitter, and Instagram provided businesses with new avenues to engage with customers in real-time, address concerns publicly, and build communities around their products or services. Companies began to leverage user-generated content and social proof, encouraging customers to become brand advocates. This era saw retention marketing evolve from purely transactional efforts to building emotional connections with customers.

The Era of Big Data and Analytics

The 2010s marked the era of big data and analytics. Companies could now process vast amounts of customer data to predict behavior, personalize experiences, and prevent churn. Netflix’s recommendation algorithm and Spotify’s personalized playlists exemplify this data-driven approach to retention. The emergence of marketing technology (martech) platforms offered comprehensive solutions for customer relationship management, data analytics, and automation. These tools enabled businesses to segment their customer base, track behavior, and deliver highly personalized experiences.

Customer Data Platforms (CDPs) became essential, integrating data from various touchpoints to provide a unified view of each customer. The late 2010s and early 2020s saw the rise of CDPs and AI-driven marketing automation. These technologies allowed for even more sophisticated personalization and predictive modeling, enabling brands to anticipate customer needs and tailor their retention efforts accordingly.

The D2C Revolution and Mobile-First Strategies

The D2C boom in the mid-2010s brought retention marketing to the forefront for many digitally native brands. Companies like Dollar Shave Club, Warby Parker, and Glossier built their business models around cultivating long-term customer relationships, often through subscription-based services. These D2C brands focused heavily on retention marketing, using subscription models, personalized email campaigns, and loyalty programs to maintain customer engagement and drive repeat purchases.

Mobile apps became crucial retention tools, with push notifications and in-app messaging allowing brands to stay connected with customers. Loyalty programs evolved into mobile-first experiences, like Starbucks’ highly successful rewards app. The concept of Customer Lifetime Value (CLTV) became central to retention strategies, guiding marketing investments and efforts.

The Impact of COVID-19 and Future Trends

The COVID-19 pandemic in 2020 accelerated the shift towards digital commerce and highlighted the importance of customer retention. With acquisition costs rising and consumer behavior changing rapidly, many B2C and D2C businesses doubled down on retention strategies.

Today, retention marketing is more critical than ever. The integration of AI, machine learning, and advanced analytics is pushing the boundaries of what’s possible in customer retention. Concepts like hyper-personalization, omnichannel experiences, and predictive customer service are becoming standard practice for leading B2C and D2C brands.

The future of retention marketing lies in the further integration of artificial intelligence and machine learning. These technologies offer unprecedented capabilities for predicting customer behavior, personalizing interactions, and automating engagement. Innovations such as chatbots, personalized product recommendations, and dynamic content are becoming standard practices.

As we look to the future, the focus on retention marketing is likely to intensify. With increasing competition and rising customer acquisition costs, the ability to retain and grow the value of existing customers will be a key differentiator for successful B2C and D2C businesses. Companies must continually adapt their retention efforts, leveraging the latest technologies to build lasting customer relationships and ensure sustained growth in an increasingly competitive digital landscape.

Rebalancing

Retention marketing budgets have lagged acquisition spends. Here are possible reasons (as provided by Claude and ChatGPT):

Immediate Impact and Short-term Focus: Acquisition campaigns often show immediate results in terms of new customer numbers and sales, providing quick wins for marketers. The direct correlation between spending and short-term revenue growth makes it easier to justify and allocate larger budgets to these campaigns. This short-term mindset often leads to neglecting long-term strategies like customer retention.
Quantifiable Metrics and ROI Measurement: Acquisition metrics like Cost Per Acquisition (CPA) and return on ad spend (ROAS) are straightforward and easy to measure, making it simpler to demonstrate ROI. Retention marketing, on the other hand, involves more complex metrics such as customer lifetime value (LTV), churn rate, and engagement, which can be harder to quantify and attribute directly to specific marketing efforts. This difficulty in measuring retention ROI makes it challenging for marketers to justify increased spending on retention.
Pressure for Growth and Stakeholder Expectations: Companies, especially startups and those backed by venture capital, are under constant pressure to demonstrate rapid growth. New customer acquisition is often seen as the quickest path to achieving this, leading to a disproportionate focus on acquisition at the expense of retention. Investors and stakeholders often prioritise rapid growth and market share expansion, pushing companies to focus on acquisition rather than retention.
Organisational Structure and Perception: In many organisations, acquisition and retention efforts are managed by separate teams with distinct goals and budgets. This siloed approach can lead to a lack of coordination and an imbalance in budget allocation, with acquisition teams often having more resources and influence. Additionally, many organisations view retention as a customer service or product responsibility rather than a core marketing function, leading to underinvestment in retention-focused marketing initiatives.
Lack of Innovation in Retention Channels: While digital advertising and acquisition technologies have evolved rapidly, retention marketing tools and channels have lagged. This lack of innovation makes it harder to create compelling retention campaigns that can compete with the excitement and perceived effectiveness of acquisition efforts. Historically, there have been more established tools, platforms, and strategies for customer acquisition compared to retention.

So, what can be done to change the situation and rebalance acquisition and retention? (These are suggestions from Claude and ChatGPT.)

Shift Focus to Customer Lifetime Value (CLV): Educate stakeholders on the importance of CLV and how it impacts long-term profitability. Emphasise how increasing LTV through effective retention strategies can lead to more sustainable and profitable growth. Highlight case studies and data that demonstrate the long-term benefits of a balanced approach.
Integrate Acquisition and Retention Efforts: Break down silos between acquisition and retention teams to create a more holistic marketing strategy. By integrating efforts, companies can ensure a more balanced allocation of resources and a seamless customer journey from acquisition to retention. This integration can help balance budgets between acquisition and retention.
Leverage Advanced Analytics, AI, and Retention-focused Technologies: Invest in advanced analytics, AI-driven technologies, and retention-specific tools to better understand customer behaviour, predict churn, and personalize retention efforts. These tools can provide actionable insights and demonstrate the effectiveness of retention strategies, making it easier to justify increased budgets. Develop more sophisticated metrics and attribution models for retention efforts, including predictive analytics to forecast the impact of retention initiatives on future revenue.
Develop Innovative Retention Campaigns and Strategies: Innovate in retention marketing by leveraging new technologies and channels, such as personalized email marketing, loyalty programs, and interactive content. Create compelling retention campaigns that engage customers and build long-term relationships. Implement advanced segmentation and personalization techniques to create highly targeted retention campaigns.
Align Incentives and Create Retention-focused KPIs: Align marketing and sales incentives with retention goals. Encourage teams to focus not only on acquiring new customers but also on keeping them engaged and satisfied. Establish key performance indicators specifically for retention, and tie them to overall business objectives. This can help elevate the importance of retention efforts and naturally lead to more focus and investment in retention strategies.
Demonstrate Cost-effectiveness and Showcase Success: Highlight how retaining existing customers is often more cost-effective than acquiring new ones. Showcase case studies and success stories where retention efforts have significantly impacted business outcomes, helping to build internal support for increased retention focus.
Develop a Customer-centric Culture: Foster a company-wide culture that prioritizes customer satisfaction and long-term relationships. This can naturally lead to more focus and investment in retention strategies.

Rethink

Marketing indeed needs a fundamental rethink. The industry’s disproportionate focus on acquisition has led to a significant shift in profits from brands to adtech companies. This imbalance has created a cycle where marketers are constantly chasing new customers at the expense of nurturing and growing relationships with existing ones. Meanwhile, martech software providers have largely stagnated in their innovation, primarily focusing on incremental improvements to existing technologies such as CDPs, segmentation tools, and personalisation engines.

While these technologies have their place, they haven’t delivered the transformative impact on customer retention and lifetime value that many marketers hoped for. The lack of significant breakthroughs has left many brands struggling to differentiate themselves and truly engage their customers in meaningful ways.

Generative AI, while promising, has thus far been primarily utilised for content creation, barely scratching the surface of its potential to revolutionise marketing strategies and customer interactions. Similarly, communication channels have remained largely static, with only minor evolutions such as the adoption of WhatsApp in certain markets.

This stagnation calls for a paradigm shift in how we approach marketing. Instead of merely adapting existing marketing concepts, we need to “re-engineer” our approach, drawing inspiration from engineering principles of innovation, efficiency, and scalability.

The five innovations I mentioned (Co-Marketer, Digital Twins, Large Customer Models, Epps and ActionAds, and Bundled Kaizen Services) represent a shift from traditional marketing thinking to an engineering-inspired approach. They focus on solving fundamental challenges in customer retention and engagement through technological innovation and data-driven strategies. By leveraging these technologies, marketers can move beyond the limitations of current martech solutions and create truly transformative customer experiences.

Co-Marketer: Engineers a data-driven decision-making system using Agentic AI, precisely predicting and responding to customer needs
Digital Twins: Constructs virtual models of customers for real-time behaviour simulation, enabling dynamic strategy optimisation
Large Customer Models: Architects comprehensive data integration systems, facilitating proactive customer relationship management
Epps (Email Apps) and Action Ads: Reimagines transform passive communication channels as interactive, revenue-generating platforms that enable direct customer engagement and action
Bundled Kaizen Services: Implements continuous improvement processes, ensuring ongoing optimization of retention technologies and strategies.

This re-engineering of retention marketing isn’t just about adopting new technologies; it’s about fundamentally changing how we think about customer relationships. It’s about building systems that can anticipate customer needs, create personalised experiences at scale, and continuously adapt to changing behaviours and preferences. By embracing this engineering mindset, marketers can shift from a reactive, acquisition-focused approach to a proactive, retention-driven strategy that maximizes customer lifetime value and drives sustainable business growth.

In essence, this new approach to retention marketing combines the creativity and customer-centric thinking of traditional marketing with the systematic, data-driven approach of engineering. It’s about building a marketing ecosystem that’s not just efficient at acquiring customers, but excels at retaining and growing customer relationships over time. This is the future of marketing – not just as a set of tactics, but as a comprehensive, engineered system for creating and maintaining customer value.

Revolution – 1

There are five foundations for the retention revolution. Let’s discuss each of them. (This was written with inputs from Claude and ChatGPT, based on my past writings.)

Co-Marketer

The Co-Marketer is an AI-powered marketing assistant that collaborates with human marketers to optimize various aspects of marketing strategies. It leverages Agentic AI to perform tasks such as segmentation, campaign planning, content creation, and journey optimization. Co-Marketers can aggregate and analyse vast amounts of data, predict customer behavior, generate personalized content, and execute marketing campaigns autonomously. They provide real-time optimization recommendations and engage in interactive dialogues with human marketers. For CMOs, Co-Marketers offer enhanced efficiency, improved personalization, strategic insights, and scalable solutions. They represent the future of marketing, promising a “Department of One” for a “Segment of One” approach.

Co-Marketer: Martech meets AI: “Think of the co-marketer not as a tool, but as a person. Co-Marketers like Raman will take on goals rather than do simple request-reply chats. This is the next generation of AI where an AI agent can spawn and supervise other agents, much like a manager can. From segmentation to content to channel orchestration, AI agents can do the work of a marketing department to assist the CMO. What the CMO needs to do is to give the broad direction. For example, the CMO could say, “For my Best Customers, I need to ensure 20% revenue growth and an increase in frequency of purchase.” The Co-Marketer then should be able to identify the right products and the persuasion messages specific to each individual (N=1) to work towards achieving the outcome. For this, the co-marketer will need to coordinate with a Digital Twin for every customer.”

Digital Twins

Digital Twins in marketing are AI-powered virtual representations of customers or customer segments. There are two types: Segment Twins, representing groups with similar behaviors and preferences, and Singular Twins, replicating individual customers. These twins provide comprehensive insights into customer behaviors, preferences, and interactions. They enable marketers to simulate scenarios, test strategies, and deliver highly personalized experiences. Digital Twins interact with Co-Marketers in a “mirror world” to identify optimal engagement strategies. By facilitating true 1:1 personalization and enabling precise targeting of customer groups, Digital Twins transform marketing from broad approaches to highly tailored strategies.

AI-Powered Digital Twins: Marketing’s Marvel: “Segment Twins represent customer groups with shared behaviours and preferences, enabling marketers to craft targeted content and strategies for specific segments. Marketers can also have conversations with personas representing each of the segments. For example, a segment twin could be asked to rank email creatives in terms of likely performance. Singular Twins, on the other hand, are individual customer replicas that provide personalised recommendations and guide customer journeys. They become more powerful with accumulation of individual data (both first- and zero-party, and derived attributes) and the progression of journeys in the lifecycle. These twins continuously evolve, integrating new data and interactions to remain current and accurate.”

Revolution – 2

Large Customer Models (LCMs)

LCMs are advanced AI models that serve as the foundation for AI-first marketing strategies. Built on extensive customer data, LCMs create dynamic, real-time evolving profiles of customers. They consist of three layers: generic foundational models (like ChatGPT), a marketing-specific foundational model (combining intelligence for both adtech and martech channels), and an enterprise-specific model incorporating PII data. By leveraging the “5 Cs” of customer data (Customers, Channels, Cohorts, Catalog, and Conversations), LCMs enable deeper personalization, precise targeting, and more effective marketing strategies across all customer touchpoints.

Large Customer Model: Foundation for AI-first Martech: “The Large Customer Model (LCM) serves as the critical foundation upon which Digital Twins, Co-Marketers, Mirror Worlds, and Generative Journeys can work their magic. By leveraging the power of LCMs, businesses can predict customer needs, personalize interactions, and create seamless, proactive customer experiences that not only reduce support costs but also enhance customer satisfaction and loyalty.”

Epps and ActionAds

Epps (Email Apps) represent the next evolution in email engagement, leveraging AMP technology to create interactive, app-like experiences within emails. Epps are multi-screen implementations that interact with backend databases and update in real-time when opened. They are self-contained, eliminating the need for external websites or apps. Epps can include features like interactive product catalogs and in-email transactions.

Epps: The Next Evolution in Email Engagement: “Epps can revolutionise email engagement by containing all interactions within the inbox, eliminating the need for clickthroughs to external pages, and dynamically updating with each open. This seamless experience enhances user engagement and conversion rates, making email a vital channel for deeper customer relationships and improved brand profitability… Think of Epps as the third major property for brands, alongside websites and mobile apps… The power of push, the familiarity of the inbox, and the interactivity of Epps create a compelling platform for capturing attention, driving engagement, and facilitating actions – exactly what brands need to maximise conversions.”

ActionAds are a new format of interactive advertisements embedded within emails, leveraging AMP technology and Atomic Rewards. These ads enable users to complete actions such as form fills, purchases, or subscriptions directly within the email, without clicking through to external landing pages

Ads in Emails: Some New Ideas: “PII, Push, in-Place, and Payments are the 4 Ps which are at the heart of…ActionAds. The thinking behind [ActionAds] is to create new formats and experiences which delight consumers. The best ads are those where the readers/viewers don’t think of them as ads but as content that is of value to them.”

Bundled Kaizen Services

Bundled Kaizen Services combine human expertise with AI-driven enhancements to provide continuous improvements in martech platforms. This approach ensures that the gap between platform capabilities and marketer usage is minimized. By integrating real-time data and feedback, Bundled Kaizen Services can adapt to evolving customer needs, delivering a consistently optimized user experience and driving long-term engagement and retention.

Bundled Kaizen Services: An Advantage for Indian SaaS: “While automation and AI can drive significant enhancements in real-time, the understanding and adaptability of human intervention could elevate the product’s efficacy to new heights. By integrating a Kaizen-inspired layer of continuous and deliberate refinement, [martech companies can] not only anticipate and adapt to the evolving needs of [their] customers but also carve out a distinct competitive edge. The Kaizen approach would transcend the conventional boundaries of SaaS offerings, transforming [the] product into a dynamic, ever-improving solution uniquely attuned to deliver unparalleled value and performance to…customers.”

Additional References

Reunification

Here are the three tech evolutions of the martech stack.

Martech 1.0 was all about stringing together point solutions to begin the process of customer engagement.

Martech 2.0 was about creating a platform in the form of a unified stack and unichannel engagement to improve customer experiences.

Martech 3.0 is about re-engineering the stack to bring together data, CX (customer experience), Agentic AI, and services to maximise retention and customer LTV. This stage represents the future of retention marketing, transforming random customer interactions into predictable, recurring revenues.

I think of this as Marketing’s Grand Unified Theory.

Marketing’s Grand Unified Theory (GUT) integrates two powerful triads to revolutionise retention marketing and drive recurring revenues.

On one side, we have Marketing’s AI Triad, which combines Agentic AI, Adtech+Martech integration, and advanced tools like Large Customer Models, Digital Twins, and the Co-Marketer. These components work together to create a comprehensive, data-driven, and hyper-personalised marketing strategy.

On the other side is Email’s New Triad, which leverages AMP and Atomic Rewards to enhance email engagement through AMPs, Epps, and ActionAds. These innovations transform emails into interactive, conversion-driving platforms, creating hotlines between brands and their customers.

Bundled Kaizen Services ensure continuous improvement and seamless integration of these technologies, enabling marketers to maximise customer lifetime value (LTV) and minimise customer acquisition costs (CAC).

This unified approach bridges the gaps between data, customer experience, AI, and services, setting the stage for Martech 3.0’s re-engineered stack to achieve sustained customer retention and recurring revenues, creating a profits flywheel for the Profipoly journey.

Refinement

ChatGPT

Summary

This essay delves into the evolution of the martech stack and its profound impact on retention marketing. Starting from Martech 1.0, which focused on assembling point solutions to initiate customer engagement, the journey progresses to Martech 2.0 that unified these solutions into a cohesive platform aimed at enhancing customer experiences. Now, Martech 3.0 emerges, re-engineering the stack by integrating data, customer experience (CX), Agentic AI, and services to maximize retention and customer lifetime value (LTV). This transformation, termed Marketing’s Grand Unified Theory (GUT), combines Marketing’s AI Triad and Email’s New Triad to revolutionize retention strategies, creating predictable and recurring revenues. By leveraging innovations like Large Customer Models, Digital Twins, Co-Marketers, AMP-powered Epps, ActionAds, and Bundled Kaizen Services, businesses can shift from sporadic interactions to sustained, profitable customer relationships, setting the stage for a new era in retention marketing.

Additional Ideas

Omnichannel Personalization: Emphasize the importance of delivering a consistent and personalized experience across all channels, not just digital but also physical touchpoints, to enhance overall customer satisfaction and retention.
Customer Journey Mapping: Highlight the role of advanced customer journey mapping tools that use AI and machine learning to predict and influence the customer’s path, ensuring timely and relevant interactions.
Behavioral Analytics: Integrate insights on how behavioral analytics can help understand and predict customer actions, enabling more effective personalization and engagement strategies.
Loyalty Programs: Discuss the evolving nature of loyalty programs, particularly those that leverage gamification and dynamic rewards to foster deeper customer engagement and loyalty.
Feedback Loops and Continuous Improvement: Stress the significance of continuous feedback loops from customers, using this data to constantly refine and improve retention strategies and customer experiences.
Data Privacy and Ethical AI: Address the growing concern around data privacy and the importance of ethical AI in building trust and ensuring compliance with regulations like GDPR.
Community Building: Explore the trend of brands building online communities and forums where customers can engage with each other and the brand, fostering a sense of belonging and loyalty.
Dynamic Content Delivery: Highlight the impact of delivering dynamic and contextually relevant content in real-time based on customer interactions and preferences.

Claude

Summary

This essay explores the paradigm shift needed in marketing, emphasizing a move from acquisition-focused strategies to retention-centric approaches. It introduces five key innovations – Co-Marketer, Digital Twins, Large Customer Models, Epps and ActionAds, and Bundled Kaizen Services – that promise to revolutionize retention marketing. The author argues that these AI-powered technologies will enable marketers to anticipate customer intent, influence actions, and create personalized experiences at scale. The essay traces the evolution of retention marketing, highlights the current imbalance in marketing budgets, and proposes a new framework (Marketing’s Grand Unified Theory) that integrates AI, data, and customer experience to drive recurring revenues and maximize customer lifetime value.

Additional Ideas

Blockchain and Web3 technologies: Explore how these could enhance data privacy and create new loyalty mechanisms.
Voice and conversational AI: Discuss the potential of voice-activated marketing and its impact on retention strategies.
Augmented and Virtual Reality: Consider how immersive technologies could create new retention-focused customer experiences.
Sustainability and ethical marketing: Address how these growing concerns could influence retention strategies and customer loyalty.
Edge computing: Explore its potential in enabling real-time, localized personalization for retention marketing.
Quantum computing: Discuss its future potential in processing vast amounts of customer data for even more sophisticated retention strategies.
Neuroscience and behavioral economics: Incorporate insights from these fields to enhance the effectiveness of retention strategies.
Cross-industry pollination: Explore how retention strategies from other sectors (e.g., SaaS, gaming) could be applied to B2C/D2C businesses.
Regulatory landscape: Address how evolving data protection laws might impact the proposed retention strategies.
Integration with offline experiences: Discuss how these digital retention strategies could be linked with physical store experiences for omnichannel businesses.

Renaissance

2 stories from the 2025 future.

Claude

As the sun rises on a crisp Monday morning in 2025, Maya, the Chief Marketing Officer at TrendSetters, a leading D2C fashion brand, settles into her home office. She takes a sip of coffee and opens her laptop, ready to start another exciting week in the new era of retention-focused marketing.

“Good morning, Maya,” chimes in Raman, her AI Co-Marketer. “I’ve analyzed our weekend performance and have some insights to share.”

Maya smiles, remembering the days when she’d spend hours poring over fragmented data from various platforms. Now, Raman presents a holistic view of customer behavior, seamlessly integrating data from their e-commerce platform, social media, and even brick-and-mortar stores.

“Thanks, Raman. What’s our retention rate looking like?”

“Our 30-day retention rate has increased by 15% compared to last month,” Raman reports. “The personalized ‘Style Journey’ emails powered by our Epps have been particularly effective. Customers are spending an average of 3 minutes interacting with each email, and we’ve seen a 25% increase in repeat purchases.”

Maya nods approvingly. The days of generic blast emails are long gone. Now, each customer receives a dynamic, interactive email that updates in real-time, showcasing new styles based on their browsing history and previous purchases.

“That’s great news. How about our high-value customers?”

“I’ve been working with the Digital Twins of our top 100 customers,” Raman responds. “Based on their recent interactions and purchase patterns, I’ve identified an opportunity for a limited-edition collection that aligns with their preferences. Would you like me to brief our design team?”

“Absolutely,” Maya says, marveling at how seamlessly customer insights now flow into product development. “And let’s use ActionAds to promote it. We can embed a virtual try-on feature directly in the email.”

As she reviews the campaign details, Maya reflects on how different her job is now compared to just a year ago. Gone are the days of guesswork and gut feelings. Every decision is now backed by data and AI-driven insights, allowing her team to focus on creativity and strategy rather than getting bogged down in data analysis.

A notification pops up on her screen. It’s from the Bundled Kaizen Services team, a group of human experts who work alongside the AI systems to ensure continuous improvement.

“Maya, we’ve noticed a slight dip in engagement from our millennial segment,” the message reads. “We’ve analyzed the patterns and have some suggestions for tweaking our communication strategy. Can we schedule a quick call to discuss?”

Maya appreciates how this human-AI collaboration allows for nuanced understanding and creative problem-solving that AI alone might miss. She quickly schedules the call, knowing that this proactive approach will nip potential issues in the bud.

As the day progresses, Maya finds herself spending more time on strategic initiatives and less on routine tasks. She’s able to focus on building brand partnerships, planning future collections, and mentoring her team. The Large Customer Model handles most of the day-to-day marketing operations, freeing her to think big-picture.

By the end of the day, Maya feels a sense of accomplishment that was rare in the old days of marketing. She’s not just chasing new customers; she’s building lasting relationships with existing ones. The constant feedback loop between customers, AI, and human creativity has transformed TrendSetters from a fashion brand into a personalized style companion for each customer.

As she logs off, Maya reflects on how Retention Re-engineering has not just changed her job, but revolutionized the entire concept of marketing. It’s no longer about transactions, but about ongoing conversations and evolving relationships. In this renaissance of marketing, every customer interaction is an opportunity to learn, grow, and create value – for both the customer and the brand.

ChatGPT

It was the year 2025, and the marketing landscape had undergone a profound transformation. The concept of Retention Re-engineering had become deeply embedded into companies, forever altering the daily lives of marketers. For Sarah, the Chief Marketing Officer at a leading eCommerce company, this new era marked the beginning of a marketing renaissance.

Sarah started her day by checking her personalized dashboard, which integrated data from every corner of the business. The dashboard was powered by the Large Customer Model (LCM), an advanced AI system that provided a real-time, holistic view of customer interactions. This wasn’t just another data visualization tool; it was the brain of their marketing operations, continuously learning and adapting from customer behaviors.

One of the most transformative elements of Sarah’s daily routine was working alongside the Co-Marketer, an AI-powered assistant. The Co-Marketer wasn’t just a tool; it was an intelligent entity that could plan campaigns, segment audiences, and even generate personalized content. Today, it suggested a series of targeted email campaigns aimed at re-engaging lapsed customers. The AI had identified these customers using their Digital Twins—virtual representations that simulated their behaviors and preferences.

Sarah reviewed the AI’s suggestions, impressed by its accuracy and depth of insight. The Co-Marketer had analyzed millions of data points, including past purchase history, browsing behavior, and social media interactions, to craft messages that felt uniquely personal to each recipient. This level of personalization had dramatically improved their customer retention rates, converting one-time buyers into loyal advocates.

One of the campaigns featured Epps (Email Apps), interactive emails that allowed customers to shop, provide feedback, and even play games without leaving their inboxes. These Epps had revolutionized their email marketing strategy, making it more engaging and effective. Sarah smiled as she saw the early results—open rates and click-through rates were higher than ever.

But it wasn’t just about digital interactions. The integration of Agentic AI into their customer service had brought a new level of responsiveness and satisfaction. The AI could handle customer queries with human-like empathy and efficiency, ensuring that issues were resolved quickly and effectively. This seamless blend of technology and human touch had strengthened customer loyalty and trust.

As the day progressed, Sarah attended a strategy meeting with her team. They discussed the latest insights from their retention efforts, focusing on how to further enhance the customer experience. The meeting was guided by the principles of Bundled Kaizen Services, a continuous improvement approach that combined human expertise with AI-driven enhancements. This ensured that their strategies were always at the cutting edge, adapting to evolving customer needs and market trends.

In the afternoon, Sarah reviewed the impact of their latest ActionAds, interactive advertisements embedded within emails. These ads had simplified the customer journey, allowing users to complete purchases and other actions directly within the email. The convenience and immediacy of ActionAds had boosted conversion rates and opened new revenue streams.

Reflecting on the changes, Sarah realized how far they had come. The relentless focus on customer acquisition had shifted towards nurturing and growing existing relationships. This retention-first approach had not only improved profitability but also fostered a deeper connection with their customers.

As the day ended, Sarah felt a sense of accomplishment. The Renaissance of retention marketing had transformed their business, creating a sustainable and profitable model centered around customer loyalty. In this new era, the marketer’s life was no longer about chasing fleeting trends but about building lasting relationships and driving continuous growth. The future was bright, and Sarah was excited to be a part of this ongoing journey.

Share this:

Like this: