Beyond CRO: is the next step Customer Experience Marketing?

At the Ecommerce Club’s latest Working Lunch London on 22nd March, we were lucky enough to hear from Adrian Moss at Monetate about the next step in personalisation, Customer Experience Marketing.

In the past CRO, A/B Testing and MVT have provided marketers and merchandisers with useful ways of improving site conversion. But times change and these tools no longer provide the business impact they once did.  The status quo within the digital marketing space has fundamentally changed and the process of customer acquisition is evolving.

Over the last 16 years there has been a reversal of power from brands to consumer. It is the age of the consumer, they’re in charge of their own journey and brands must give consumers what they want. Otherwise, quick as a click, they’ll be gone.

One of the most fundamental changes that has taken place is the growth in social. Today social constitutes 30 per cent of traffic and, more importantly, over 50 per cent of that is not from paid media.

The ecommerce funnel is now non-linear and changes all the time. It has become incredibly complicated and increasing fragmentation of the media space means it’s harder than ever to get the right space at the right time in front of the right customer.  At the same time, digital provides a level playing field for brands, resulting in an intensely competitive consumer driven environment.

What that means is the cost of customer acquisition is growing.  If you look at the relationship between sales and ecommerce you can see it is remaining similar over time. The question must surely be why we’re not seeing a better return.

 

spend and sales

The challenge is that spend is increasing but ad spend return on investment is decreasing.

ad spend roi is declining

 

It doesn’t help that brands are constantly bombarded by the latest fads determined to change this status quo. CRO, or conversion rate optimisation is an attempt to increase conversion rates, a system for increasing the percentage of visitors to a website that convert into customers, or more generally, take any desired action on a webpage.

While there are differences between brand types (such as mass market and luxury, or electronics retail and travel) conversion rates today average 2.4 per cent. It’s unusual to see conversion rates above 5 per cent (with anything less than 1 per cent tending to show poor performance).

It would seem logical that changing a site to test and trial conversion rates is a relatively simple way to improve performance. Yet today CRO accounts for less than 5 per cent of total ad spend).  The problem is that there are diminishing returns the more that is invested.  CRO  also ignores the fact that customers are all visiting for different reasons and that the site is generic – any changes made can affect different groups in different ways. The approach, as Adrian puts it, is akin to “moving the furniture around.”

Another question is the extent to which it is feasible to continue to increase conversion rates. In a real-world shop the differentiator is often the personal interaction – the higher the ticket price, the higher the likelihood of personal service. This can be hard to replicate online but the benefit is that when that personalisation is created through technology, data doesn’t forget in the way that people can and do.

There is no question that customer demand personalisation is on the increase, with Gartner projecting that by 2016 89 per cent of brands will compete on the basis of customer experience. But in a world where very few brands can lay claim to personalisation beyond email and landing pages, what does this mean?

Simply put, what that means is providing a personal experience for the customer – with each seeing a  different site dependent on location, time, whether the site knows who we are, our history, what we click onto to get  into the site – Adrian describes this as “the route to customer centricity.” And it’s what Monetate claims to provide with its concept of customer experience marketing.

understanding the customer

Recognising where the customer comes from means more than simply whether or not they have been funnelled to the site via a particular campaign, or from a particular device. Brands need to be able to recognise customers and where they’re coming from. Where did people come from, what time of day is it, what have they looked at? Do we know their gender (enabling brands to change navigation to provide increased relevance), was the trigger keyword specific, is there a connection to link (downsteam data), are a historic customer?

There are number of problems that such a strategy addresses:

  • Media efficiency – relevant to their click-through
  • Reduced bounce rate
  • Higher AOV – if we can curate we can cross-sell/up-sell
  • Increased conversion
  • Better brand engagement
  • Social media effectiveness
  • More repeat traffic

[these are standard things that should be expected for any investment, but there’s more]

  • Higher customer lifetime value
  • Location enables digital/real world cross fertilisation
  • Leverage big data
  • Giving consumers what they want

Of course this sort of optimisation doesn’t happen overnight, it’s a process but one that every brand can engage with at some level. While the goal may be a site that is created personally for the customer as they enter, at the beginning the data can be as simple as browsing or purchasing history.

There is no question that there are obstacles to personalisation, which can range from concerns about impact on business operations to challenges of ownership where true personalisation requires an overview of many elements of the business. Some of the challenges raised can be:

  • Complexity – it can take 10 weeks to see a change made in a major brands site
  • Size – many brands worry they’re too small to make it worthwhile, but as Adrian points at, that may be true at a turnover of £.05k but at turnover of £4-5 million if you can increase turnover by 2 per cent, that’s significant
  • Technology – most personalisation platforms exist outside ecommerce platforms, making business use very easy
  • Data – many brands feel they haven’t got any, or are in the process of aggregating data
  • Cost – if the response is an increase in customer revenue by 15 times, it would seem a good business case
  • Resource – how would the brand manage the system?
  • Shelfware – brands are concerned about ending up with another product that they don’t use
  • Politics – because it has the potential to affect P&L it can cross departmental lines and so the politics and business structure matter
  • Ownership – who is in control?

There are always questions when a new idea, or a new platform, is introduced. One of the most useful things is to see the impact of such an approach in action. According to Adrian, one of the most obvious first uses is to increase order value from VIPs or loyal customers.

He discussed case studies of Office Depot which saw a 540 per cent uplift. With Waitrose, the retailer implemented a series of 5 promotions to get customers to buy 5 times – because Waitrose had determined that once customers have bought from the retailer 5 times they are significantly more likely to become a long term customers. The Waitrose promotions differed by where the customer was in the funnel, who they are and what they buy. And the campaign was combined across online, email and app.

What it boils down to however is that in ecommerce, what matters is revenue and customer engagement. It’s important to acknowledge the current paradigm and that increasing spending is not having a significant impact on return. There are ways of tackling such problems but the one that most agree will have the optimal long term results is personalisation.

At the moment, CRO is only done by a few people so it offers a competitive advantage, but customer experience marketing provides an opportunity for brands to gain a competitive advantage over the medium term.

According to Adrian, “It can be about doing promotions but it’s more about differentiating with a personalised experience. If the site knows your birthday for example, why don’t they wish you a happy birthday and give you a present?”

Of course if conversion rate optimisation and personalisation seems like a no brainer why aren’t more people doing it?

There are a number of answers to that question, one of which is that it’s not as sexy or exciting as new customer acquisition. Brands acquire customers because it’s easier to explain, in terms of budget and return, which makes it easy to pitch. But in the end a lot of the barrier to adoption is about understanding the possibilities, managing fears about brand skills (in data analysis, functionality or resources) and educating the market on what’s possible.

Personalisation – everybody wants it but most accept that no one is really doing it right yet. And that means a chance for brands to make their mark, buck the current paradigm and build that competitive advantage today.