The 3 Golden Rules of the importance of customer identification in consumer businesses for retailers, eCommerce, and brands
Whether you are a retailer, an e-tailer, or both, it is exceedingly hard to compete with prices, products, delivery times, or other services. The true competition lies in targeted and personalised marketing, and to do that you need customer data. To collect and utilise your customer data, your customer needs to be identified.
Rule #1: Customer data is your most important competitive advantage
Finland is a peculiar country in that for decades we only had two major grocery chains, the K Group and the S Group. That was until the German chain of grocery stores Lidl came to Finland to challenge them and ramp up the competition in 2002.
One of the campaigns over the years with which Lidl wanted to stand out against the two giants, was to offer customers 10% discounts “with any card”. You got loyal customer benefits with a birthday card, a library card, or your driver’s licence. Any card.
The campaign was done in May of 2019. Lidl wanted to stand out by not having a frequent flyer programme.
A year later, in June of 2020, Lidl rolled out their loyalty programme. They would have done it even sooner, had it not been for the Covid-19 pandemic. Lidl, too, had realized the importance of customer identification and loyalty programmes. Why? Because when you no longer can effectively compete with prices, products, delivery times, etc., customer data becomes your number one competitive edge. In order to collect and utilize customer data, the customer has to be identified.
Rule #2: Growing sales is not enough for eCommerce any more. You need to grow your customer data, too
There are two parts to marketing: customer acquisition and customer marketing. With customer acquisition, customer data is not available until the customer is identified. Customer identification is done by getting the customer’s email address, telephone number, or customer ID. Cookies are a way to identify a customer as well, but since the death of the third-party cookie is upon us, targeting and personalising your communication will require your own customer data. Especially with display advertising on Google and Facebook.
The retailer’s and e-tailer’s need for customer identification and customer data is quite obvious, then:
- You only start to know who your customer is after identifying them.
- Data-based communications with the customer are both relevant and cost-efficient.
- You are not wasting your marketing budget on mass marketing.
- You get better customer loyalty and conversion.
- Paid advertising is based on the capitalisation of your own customer data.
- Customer data can be enriched only for identified customers.
Halti, the premium Finnish outdoor brand, makes a good case in point. When acquiring new newsletter subscribers, they don’t settle for contact information. They also make a little survey of preferences. In other words, they ask whether the customer is interested in outdoor activities, running, downhill skiing, or cross country skiing.
Halti’s way of moving from customer acquisition to identified customers and customer marketing is a testament to a win-win. While people identify their sporting and outdoor life favourites, Halti gains insightful information about their lifestyle. Halti can then personalise their newsletters based on the information of their customers’ interests.
What’s notable here is that you don’t need to be a listed global business to reap the same benefits. An eCommerce, a retailer, and a brand can implement these golden rules incrementally, which is great news especially for new businesses and startups.
Rule #3: Collect data and utilize it across eCommerce and physical locations
Customer data can and should be collected both in your eCommerce site and physical stores. Customer data is enriched by customer information that is acquired in either. Again, the customer needs to be identified in order to get the data. Also, a Customer Data Platform (CDP) is needed to effectively edit and combine all customer data into a single 360-degree customer view in real time. The point here is, that the silos between eCommerce and brick-and-mortar locations, can and should be demolished.
Because physical locations are a great source of sales, the customer data that they can offer should be just as important in marketing as any customer data that is gathered over the internet. With incorporating sales and customer data from physical locations, you get the ultimate omnichannel sales conversion data. Measuring the success of your campaigns is at its best when you get sales data from your physical locations as well.
Furthermore, retargeting is also enhanced, since you won’t be retargeting your display ads to customers that have already bought your products from your physical locations, not just from your eCommerce. That makes for cost-effective campaigns in Facebook and Google Ads.
The strategic “why” of it all: from customer identification to customer retention
Understanding your customer - that is, customer data - should be at the heart of all your marketing (to see why, take another look at the bullet list above). The most important reason for customer identification is customer marketing. Customer identification works as the means for moving from customer acquisition to customer marketing. Customer marketing, of course, aims for the growth of sales. But there’s a greater aim as well: customer retention.
It is widely and well documented that customer acquisition is easily at least five times more expensive than customer retention. The smart marketer emphasises customer retention over customer acquisition, because loyal and returning customers bring in the most money. Here are some statistics:
- 5 percent growth in customer retention grows profits from 25 to 95 percent.
- A returning customer is 14 times more likely to make a purchase than a new customer.
- 20 percent of your customers bring in 80 percent of your sales.
The equation is quite simple, really. Customer retention depends on effective customer marketing. The most effective customer marketing depends on targeted and personalised campaigns. And effective targeting and personalisation depends on customer data, which depends on customer identification.
There you have it.
You don’t have to do everything at once and you don’t need to have the most sophisticated systems in place from the start. The key is that you identify your customers as soon as possible in both eCommerce and physical locations, and that you start collecting and using your customer data. Customer data that has been collected over time can easily be imported into the Custobar Customer Data Platform. Now, or on a later date.