Using Intelligence to Drive Customer Growth in Retail
Retailers are under siege. COVID-19 hangover, supply chain issues, labor shortages, rising labor costs, inflation, economic uncertainty; the list goes on. Thankfully, many retailers aren’t yet feeling the pinch. In many cases, the last two years have been huge, with several retailers posting record sales and profits. But this hasn’t come without some challenges.
The very fabric of retail spending is changing faster than ever before. Traditional brick-and-mortar shopping experiences are not attracting consumers like they used to, online shopping has exploded, and a new generation of shoppers is demanding investments in DEI and sustainability. But value is still king, and dwindling discretionary spending and a resurgence of travel means there is less money to go around and that competition is on the rise.
All these factors put a strain on margin, which underscores the importance of profitability. Marketers need to find ways to do more with less and make better use of their existing investments to win in a hyper-competitive market.
It’s important that retailers prepare for uncertainty and put themselves in a position to win by investing in technology that gives them a leg up. In this article we’ll explore three ways that retailers can leverage their technology to drive customer growth while protecting margin and increasing profitability.
Start By Getting Closer to the Data
There’s no shortage of data. Most marketers have more data than they know what to do with. The old cliché of drowning in data and starving for wisdom is more relevant than ever. According to a recent study by Forrester Consulting commissioned by Zeta, almost half of marketers don’t trust their tech stacks. This is a big problem. Marketers report that fragmented technology leads to:
- Manual effort required to analyze data for actionable insights (57%)
- Challenges testing and optimizing campaigns (52%)
- Difficulty tracking and observing customer preferences (52%)
- Difficulty building holistic customer profiles (49%)
If you can’t trust your tech, you can’t rely on your data. And if you can’t rely on your data, you’re flying blind because data is the key to understanding growth and profitability.
By combining first and third-party data you can unlock incredibly detailed insights on your customers: who returns things and who doesn’t, who pays full price and who only buys with a coupon, who purchases multiple products and when. All these factors give you a more unified picture of what’s driving revenue. It also shows you how much wallet share you have in specific categories.
Growing spend from current customers is one of the fastest ways to drive increased profitability. The key to doing so is having access to real-time data that can gauge customer intent during the awareness and consideration stages. By leveraging view and click behavior combined with competitive shopping insights, you can proactively connect with consumers before they make a purchase to ensure you are top of mind.
By adopting technology that helps unify your data and augment it with additional demographic, psychographic, and behavioral information, you can better understand your customers, your competition, and where you should be spending your resources to increase margin.
There are three themes to consider when thinking about how to better leverage your data: Identity, Intelligence, and Activation:
In most cases, about 96% of people who visit a website are unknown. Identifying these people is critical to building a relationship as soon as possible. Each click, pageview, and purchase is data that can be used to personalize their next experience.
Even brands with loyalty programs can’t identify all the consumers shopping in store. Probabilistic matching helps solve this problem. Modern martech can use limited information such as location and the name on a credit card to match an anonymous shopper to a known profile. Brands can also now determine that multiple disconnected past sessions or purchases were actually the same person on different devices or channels. This brings identity full circle; connecting interactions from all channels across the consumer journey which has a dramatic effect on ROI.
Zeta’s ID graph, which contains profiles on over 235 million Americans, enables you to identify previously unknown visitors and bolster your first-party data with demographic and behavioral data. This creates a persistent customer ID that can be used throughout the entire purchase journey to create smarter, more relevant campaigns and promotions.
Data without intelligence is useless. There’s simply too much incoming information to parse through manually. You need a platform with AI at its core to extract relevant insights and important information.
You can’t rely on outdated strategies, such as media mix modeling, to develop your marketing strategy any longer. You need to adapt and leverage real-time techniques like deterministic incremental attribution to optimize marketing and media budgets. AI helps democratize that intelligence without the need for bloated analytics and data science teams.
Zeta helps you harness the power of AI to segment your customer base into actionable groups using proprietary propensity scores combined with factors like cart size, average order value, purchase frequency, and engagement levels. By identifying your most profitable customers you can better deploy your resources to increase margin while decreasing churn.
The final piece of the puzzle is activation. All the data and intelligence in the world isn’t going to make a difference if you can’t act in real time across channels. Understanding which channels are important to each individual consumer will not only increase your response rates but allow you to become more efficient in your spend.
Adopting a platform like Zeta that combines the capabilities of a CDP, ESP, and DSP with a proprietary data cloud enables you to create truly individualized experiences that span every conceivable channel and retain customers.
The Benefits of Customer Intelligence
Fusing Identity, Intelligence, and Activation together unlocks some truly transformational benefits that will help you maintain profitability and margin while navigating changing consumer behavior and shifting market conditions.
Increase Spend Efficiency
Marketers need to be careful about where they spend their money. Resources are scarce, and without a strategy it’s easy to run through your budget. Without a persistent customer ID, you run the risk of wasting valuable resources by engaging the same consumers on different channels with disconnected messages and irrelevant offers. Not only is it frustrating for the customer, but it’s also expensive and inefficient for you.
Zeta is a single platform that connects the main components of your martech stack, including your CDP, ESP, and DSP. With Zeta, you get real-time data from all channels, underscoring the most profitable ones. This helps marketers invest wisely on important channels and quickly see what’s working.
Zeta also offers AI-Based analytics to better allocate media and improve ROAS. This means smarter decisions about where to allocate resources and easier identification of the best marketing channels and strategies for specific audiences.
Market to Your Best Customers
While this might sound straightforward, it’s more challenging in practice. First, you must figure out what actually makes a good customer. For many retailers, a good customer is someone who frequently buys from them. However, when you start looking at customers on an individual basis from a profitability standpoint, the equation shifts.
Take returns for example. In 2021 there was a staggering $761 billion in returned merchandise and in 2022, 16.5% of retail purchases in the U.S., both in-store and online, resulted in a return. This is having a huge impact on retailer margin.
Typically, in-store purchases have a margin of 32%, but it drops to 30% for online purchases. When a customer opts for Buy Online Pickup In-Store (BOPIS), the margin further drops to 23%. It’s even lower, only 12%, when items are shipped from the store.
As consumers buy more online, they often buy multiple sizes during one transaction in case something doesn’t fit. This not only pulls inventory that could be bought by someone else, but it also guarantees a return which further erodes margin by an additional 10-15%. Consumers that return multiple items in a transaction can effectively kill margin in one fell swoop.
So, while you might have a customer that buys frequently, seeing them through this lens reveals that they may be costing you money.
Zeta is addressing this issue by developing an AI model that predicts the likelihood of returns. By identifying customers less likely to return items, businesses can focus their marketing efforts more effectively, safeguarding their margins and recognizing their truly valuable customers.
Another example is discounts. If you have a customer that only purchases when they receive a 20% off coupon, each purchase has smaller margin than someone that pays full price. Most retailers have loyalty programs in place to reward repeat purchases, but what if you could reward a consumer in a more personalized manner by offering greater rewards to full-price buyers, and fewer rewards to a consumer that only buys on sale?
With Zeta’s AI-based models you can predict the revenue and margin of each individual customer for the next 12 months, leveraging key data points such as lifetime value, recency, frequency, average order value, email engagement metrics, and web behavior. This translates into a more relevant and engaging shopping experience for customers while protecting your margin and profitability.
Zeta also helps you identify which customers are most likely to respond to specific category offers or products as first- or second-time buyers. This knowledge empowers you to unlock cross-sell opportunities and tailor your marketing strategies, messages, and incentives to effectively engage both new and loyal customers.
Predict Shopping Trends
Imagine if your marketing technology could give you a peek into the future, helping you predict and prepare for what’s ahead. Retailers traditionally plan their strategies around seasonal events like back-to-school or holiday sales, aiming to maximize revenue before offering discounts.
But, in today’s unpredictable economic environment, that’s not enough. Retailers need to tap into identity and intelligence data to get an edge. Instead of just focusing on broad trends, it’s crucial to consider every factor that could influence consumer behavior and sales.
Weather is the perfect example. While weather can be a depressive force on sales (think: snowstorms), it can also be used to predict the future. Weather is often an excuse for retailers missing their goals, but with Zeta, you can flip this on its head.
Take a craft store looking to boost foot traffic as an example. If there’s rain forecast over the weekend, they know families, especially those with young kids, will seek indoor activities. By reaching out early,to potential customers living near the store, they can encourage visits before the bad weather sets in. They can even further narrow their targeting to those who typically buy items at full price, optimizing their margin.
By integrating data models that consider historical purchase trends, weather patterns, and broader economic data, retailers can fine tune their inventory management, minimizing stockouts. This rich data pool not only aids in preparation but offers insights that can be extrapolated upon.
Becoming Truly Customer Centric is the New Imperative
In today’s inflationary, often unstable retail landscape, becoming truly customer centric is no longer a luxury but a necessity for companies seeking sustainable growth. By “be more customer centric” we mean get closer to your data so you can better understand what your customers want and need. Now, more than ever, it is critical that marketers look at their programs holistically so they can further grasp where their revenue is coming from, and which customers are most valuable.
Zeta’s AI-Powered Marketing Cloud Helps Retailers Drive Profitable Customer Growth
Zeta is the only platform that is made up of a CDP, ESP, DSP and the largest private, unwalled, data cloud which equips marketers with the tools for successful. The Zeta Marketing Platform has been designed for marketers’ needs with the unique flexibility to wrap around and augment the brand’s tech stack, providing speed to intelligence, deeper analytics, and activation to deliver greater ROI. With Zeta’s modern, schemaless architecture, you can seamlessly ingest and reconcile data from anywhere in your technology stack, enabling you to build a unified view of customer behavior that can be enriched with Zeta’s proprietary Data Cloud.
But it doesn’t stop there. Zeta offers flexible data connectors that put you in the driver’s seat, allowing you to take advantage of our pre-built connectors or create custom integrations that align with your unique needs. This level of control ensures that your integration efforts are truly elevating your marketing ecosystem.
Whether the ZMP is the single platform environment removing the need for multiple point solutions, or it’s connecting the dots to extract more value from current tech investments, the AI-powered Zeta Marketing Platform is at the forefront of the next generation of marketing technology.
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