Today, it’s more difficult than ever for e-commerce brands and retailers to connect with customers, especially when the cost of doing business is on the rise. The escalating cost of acquiring and retaining customers means that increasing customer lifetime value (CLV), the metric indicating the total revenue of a customer relationship, is an even bigger priority for brands.
However, many brands, especially small- and medium-sized businesses, often lack the resources to invest in lasting relationships with their customers. So what are the costs to look out for in today’s market and how can brands overcome these by generating valuable first-party data?
The Cost of Acquiring and Retaining Customers
Customer acquisition and retention are important goals for every brand. Factors like privacy regulations, operating costs and market forces make it difficult and costly to reach consumers in a competitive landscape.
When it comes to privacy, new legislation and regulations are changing the way brands can collect and use consumer data. In the U.S., the California Privacy Rights Act (CPRA), Colorado Privacy Act (CPA) and Virginia Consumer Data Protection Act (VDPA) are going into effect in 2023. These privacy regulations will grant greater control to consumers and allow them to opt-out of ad targeting based on personal information. To acquire customers, retailers need to navigate these privacy changes with even less access to first-party data, effectively increasing the cost of retaining customers.
At the same time, advertising, discounts, and other incentives are driving up operating costs. Market forces like inflation, supply chain bottlenecks, and worker shortages are also presenting brands with unique challenges, forcing them to pass cost increases downstream to customers. Rising production, shipping and labor costs are eroding brands’ profit margins.
The Value of First-Party Data
One way brands can navigate these rising costs is to reduce their reliance on third-party channels. Instead, they can tap into first-party data through direct channels. While third-party channels provide visibility and added revenue, brands lose out on invaluable data, insights, and profitable long-term customer relationships. First-party data, on the other hand, equips brands to own the customer relationship.
But, how can brands generate this type of data? The most effective way is to lead customers (and their dollars and data) from various purchasing channels back to the brand with valuable experiences. For example, brands can offer post-purchase services like registration, extended warranties, and convenient claims processes. These touchpoints generate meaningful insights that help brands build direct, authentic relationships with product owners. They also deliver more opportunities for companies to understand and help their customers get the most out of their products.