Your most loyal customers typically end up being just one small slice out of a greater whole. But how do you personalize for them while learning how to identify and grow more customers like them? The answer is 1-to-1 personalization.
Before AI-powered personalization tools, catering to small demographics was difficult and required a lot of added time and resources. And while these demographics can have oversized lifetime value compared to larger audience segments (like bounced visitors) , it can be difficult to build a personalization strategy that effectively includes turning return customers into “best” customers. Let’s dive into what exactly the small slice dilemma is and how you can start to solve it.
What is the Small Slice Dilemma?
Many optimization and remarketing strategies focus efforts on shoppers who left a site without making a purchase. This type of re-engagement campaign caters toward shoppers who can be easily segmented by specific on-site behavior. Shoppers who bounce from the site seem to be great opportunities for site acquisition because there’s often a large percentage, but the data tells a different story: only 16 percent of these shoppers return to a site and only 1.9 percent of these visitors make a final purchase.
In many cases, your marketing time and dollars would be better spent focused on the small slice dilemma of growing more return customers.
Monetate coined this term in our recent research report (More Equals More) to describe the problem marketers face when trying to cater to their repeat customers. The customers who have made purchases time and time again are clearly their top tier, but only a small slice of the bigger picture.
In fact, as discovered in the Monetate EQ 3 2017 report and confirmed again in our More Equals More report, returning customers who made multiple purchases with a brand actually only make up a fraction of their overall traffic. And they convert at rates two to three times greater than those who’ve never purchased from the brand before. So, how do you personalize for such a tiny demographic?
Solving the Small Slice Dilemma
It can be tempting to think that focusing attention on the biggest customer segments means you’ll have the largest outcomes, but the small slice dilemma posits that this is not the case. That is certainly not the case, however, since your smallest demographics can often be your most loyal. While some brands may recognize the value derived from this segment of their audience, they may not understand where to start. The key to solving your own small slice dilemma is to understand:
a) who your best customers really are, based on metrics like lifetime value
b) what data sources (first- and third-party) are available to analyze and understand your customers
c) how AI can support your personalization efforts.
Quite often it’s small customer segments that have the highest potential value, and they cannot be reached through manual, rules-based segmentation or A/B testing. AI allows marketers to establish patterns from the data the human eye might miss. The goal is to personalize for the individual and not to target them based on preconceived notions or ideas.
True personalization involves customer intent-driven experiences delivered to every customer, every time in order to grow them into their best customers. And the benefit of personalizing for this target demographic is there. The more personalized pages a customer views, the more likely they are to make a purchase. And when a user is exposed to two pageviews versus 20, their shopping cart abandonment rates drop by 52 percent. However, car abandonment rates are not the only metric to improve. Conversion rates doubled between the second and third exposure to personalization elements and add-to-cart rates improved by 74 percent.
However, unlocking the value of this segment can be time-consuming and many organizations don’t know where to start. Luckily with the help of artificial intelligence (AI), you can quickly address this challenge to personalize experiences. AI enables marketers to understand whether a customer is returning, and use that insight to inform future interactions with them. This means, instead of focusing on previous historical behavior (as is often the case), your brand gets the value of analyzing “in session” behavior, AKA real-time context.
Next steps for building a small slice strategy
One of the best things you can do for your personalization strategy is to grow along with it. Continue to understand how to leverage technology to save your teams time and manual effort.
To learn more about the small slice dilemma and other industry insights, take a read through our Ecommerce Quarterly report More Equals More”.