November 2017 Benchmark: Holiday Marketing Success Goes Beyond Customer Acquisition

Each month, we like to provide you with some insights from our own customer data to help inform your marketing strategy. 

As we’ve talked about in previous reports, many of the most successful global brands are looking at how they can generate revenue year-round, with less peaks and troughs in monthly performance – and less reliance on the “Holiday Season,” which falls between November and January in most countries.

This year we’re likely to see more revenue online AND offline than ever before from November to January — Deloitte forecasts $110 billion for the U.S., with 51% of that via online. Over the next month, retailers and e-commerce teams must have a sound strategy for each channel and customer no matter where that customer may be in their buying lifecycle.

For many brands, the holiday season can make or break the business. According to a Monetate Labs study, 67% of the companies who fall short of their multi-year Black Friday average will also miss their multi-year average for the rest of the holiday season.

While existing customers are usually the main converters, many companies are under pressure to increase revenue and turn to acquiring new customers as a growth metric. With such a huge percentage of revenue coming from such a short period of time, it can also be make-or-break time for your marketing team.

So, in this report we’ll be looking at key trends, statistics, and metrics that can help you make the most of your customer data to plan for the holidays and prepare your teams to take advantage of the opportunities it presents.

High Traffic Doesn’t Mean New Customers

We’re now analyzing more than 3 billion customer records on behalf of our clients. One interesting result we found in looking back at Q4 last year was that our clients added more than 250 million new contacts to our platform; however, there were no real extreme peaks when it came to new customer acquisition. This means that despite seeing web traffic and revenues peak for our clients in the e-commerce and retail industries we don’t see this translating into a massive influx of new contacts or new first-time buyers hitting the customer database.

When we look at the percentage of monthly revenues coming from first-time versus repeat buyers across our client base, we can identify points in the year where more revenue comes from first-time buyers (new customers) versus repeat buyers (existing customers), but the data doesn’t support the extreme new customer growth we’re led to expect from the holiday season.

Chart 1 below shows our clients broken into top, median and bottom quartiles – where the top quartile represents the clients most dependent on new customer acquisition for revenue growth and the bottom quartile those least dependent on customer acquisition for revenue growth.

Chart 1: Trendline – share of first-time buyers in monthly revenues (e-commerce clients, Aug. 2015 – Feb. 2017).

The median results (perhaps those most accurate to use when plotting seasonal trends across customer groups) do show us a gradual climb from September 2015 (42% revenue from new customers) to December 2015 (45% revenue from new customers). We also see a similar trend from September 2016 (41.5% revenue from new customers) to December 2016 (44.2% revenue from new customers) – but what we don’t see is the explosion in new customers we’re led to expect from the industry press.

Who’s Doing All the Converting?

So if the revenue peaks are not coming from a flood of new customers, then where is the additional revenue coming from?

To answer this question, we need to drill down further into conversion rates for new customers versus existing customers during the holiday period in 2016 alongside the months on either side to make sure we can see patterns.

When we look at the conversion rate of leads to first-time buyers from August 2016 to February 2017 (refer to Chart 2), we can see that in the bottom quartile (those clients with the lowest conversion rates on average), conversions increased from a low of 1.5% in August 2016 to a high of 2.5% in December 2016 – a 66% increase. But the median results kept increasing month over month with no drop. For first-time buyers to repeat buyers, we also see a steady trend line across all client groups – top, median and bottom.

Chart 2: Conversion rate by lifecycle status (e-commerce Aug. 2016 – Feb. 2017).

What we can infer from this analysis is that while we see revenue increases during the holidays, it’s not coming from big gains in customer acquisition or big percentage changes in performance metrics. A lot of the success in Q4 can be attributed to the scale of marketing budgets allocated to this period and the absolute numbers – more budgets, more sales, more customers – but not necessarily new customers and not necessarily better performance in marketing metrics during the period.

Unless you already have a terrible time converting leads to first-time buyers (less than the 5% median), then you’re not going to make big gains in revenue by focusing just on that lifecycle stage.

Target Each Lifecycle Stage Appropriately

We need to look at the whole customer lifecycle and make sure we’re implementing programs to treat customers differently based upon whether they’re leads, first-time buyers, loyal repeat shoppers, or defecting and inactive customers. Then we need to focus on making small gains specific to these groups to generate the big gains in revenue we’re looking for.

For many clients, the best opportunities they have, both in terms of percentages and the number of customers they have to target, comes from their first-time buyers and defecting customers, those who have bought in the past but not recently. These are the customers who need to be prompted with an incentive or a compelling reason to act.

Lifecycle groups with the highest conversions

Analysis of the most recent data we have from September 2017 shows us that our clients in e-commerce and retail have managed to make big gains in new customer conversion and active, repeat purchasing customers. The median result is for clients to make 36.3% of their revenue from new customers and 26.8% from repeat purchasing customers. However, first-time-buyer-to-repeat-buyer is the lowest-performing group across all lifecycle statuses at only 5.1% as shown in Chart 3. In fact, on average, our customers make more money each month from inactive customers than they do from first-time buyers!

Chart 3: Monthly view, revenue contribution by customer lifecycle status (e-commerce, Sept. 2017).

Take care of the customers you already have first

In the run up to the holiday season, where you have the most stock, the best offers and the biggest marketing budgets, it’s essential that you don’t emphasize bringing in new customers at the expense of overlooking your existing customer base. Creating segments for your active customers really drives the most marketing ROI.

Give customers what they’re interested in and nothing else

Being able to target single order customers with similar products at similar price points has proven to be the winning strategy for clients across almost all verticals. This means that if a customer has previously spent $20 on shoes and another customer has spent $200 on a TV in a different geographical region, don’t try to sell a TV to the customer who bought shoes, and don’t sell shoes to the customer who bought the TV – consider your data to find product and purchase patterns to cluster accordingly.

If you don’t have the time or the resources, make sure you’re at the very least using product recommendations and web triggers (browse but no purchase) to capitalize on the rich data web and mobile visits give you on customer intent. This means if a customer comes to your website and browses a red dress, she is much more likely to convert if your follow-up campaigns include those products and related items. Even if you’ve got amazing prices on TVs and phones, avoid the temptation to cross-sell. Your customer has already shown you that she’s only “in the market” for a dress.

Google has recently changed their AdWords search functionality to use this type of information so you can get better and better at targeting based on behaviors and intent. We’ve been working hard to make sure we’re using product affinity to make it easier to find out what customers are most likely to buy and smart metrics to understand when they’re likely to buy and at which price point to automate these types of campaigns across Google, Facebook, email, mobile, and website.

The Message to the Marketer

We know the holidays can be tough, but we also see from the data that many of the best opportunities for new revenue come from better understanding your existing customer data. Look first at how many times someone has purchased (frequency), then when they last purchased (recency), and then the value of those purchases (value). You can make someone buy again, but the stats tell us they’re likely to buy a similar number of products at a price point similar to what they’ve purchased previously. So it’s a sensible second step to look at product purchases — or at the very least categories purchased — to determine not only who to promote it to but what to promote as well.

If you’re looking for a little extra boost as you prepare for the upcoming holiday period, get in touch with us to see how the Smart Insight Profiler could help you cluster your customers across RFM and product affinities for the holidays to accelerate your planning, or check out these other resources: Seven Steps to Successful Retention Automation, The Omnichannel Marketer’s Holiday Domination Guide, and the AI & Omnichannel Marketing webinar.

Tuesday, 28 November 2017