The death of the media flywheel is driving an advertising reset

And Edelman's Matt Collette proposes the best way to respond is with a shift toward customer retention and CLV.

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Over the coming weeks, Edelman Canada’s head of digital, Matt Collette, will be diving into tactics that can help brands build an arsenal of zero- and first-party data to help them compete in a new era of privacy, as well as forecast the future and the changing relationship between brands and consumers. Today, he looks at why brands need to prioritize customer engagement and retention to drive growth above all else. You can read part one here.

By Matt Collette

The first article in this series outlined how brands are unprepared for the disruptions we’ve seen across the privacy landscape: over the last 12 months, companies have reported rapid declines in media performance, increases in costs and greater challenges driving effectiveness. As a result, customer acquisition costs are higher than ever and competition for consumer dollars is increasing given inflation trends.

To win in this environment, we are now in a race to acquire and monetize zero- and first-party data. But to what end?

Scott Galloway, the best-selling author, famed podcaster and professor of marketing at NYU Stern School of Business, recently mused on his podcast that we are in an advertising recession. Galloway bases this declaration on the most recent round of financial results from social media companies, which have shown consistent declines in advertising revenue. Shares of Snap were down as much as 25% after the company missed top and bottom-line results.

So, is Scott Galloway right? In a word: no.

While revenue was down, Snap had 347 million daily active users in Q2 – 15 million more than the previous quarter. So why the decline in revenue? Snap’s CEO and CFO cited a tough macroeconomic environment as well as changes to Apple iOS 14.5.

Macroeconomic conditions are a concern for marketers as we enter an uncertain environment, but recent surveys show that overall marketing spend is up. In fact, according to the IAB, while brands and agencies are expected to spend less than originally planned, spending will still be higher year-over-year.

The WSJ also confirmed this in a report last week, indicating that digital ad spending would be up by double digits this year.

Snap and other social media companies are the proverbial canaries in the coalmine. They are signalling an advertising reset as the pendulum swings from a focus on customer acquisition fed by the media flywheel to a focus on customer engagement, lifetime value, and loyalty, aka retention.

Ultimately, social platforms will thrive as brands pivot to retention strategies. In an environment where customer acquisition costs are spiralling, retention strategies and tactics become very attractive. That includes focusing on building community and leveraging super customers to drive growth. Something that social platforms have always excelled at.

Not only does retention drive growth, but the zero- and first-party data that is collected helps us build more effective experiences and relationships with existing customers, while helping acquire new ones. Moreover, these approaches allow us to learn more about consumer behaviours higher up in the funnel, insights most brands currently lack.

Early movers in the marketing space are already showing us the way forward.

Multi-experience strategy

The siloed nature of how channels are currently orchestrated is one of the biggest inefficiencies in marketing programs today. A multi-experience strategy is one of the quickest ways to improve retention and drive effectiveness for marketers.

Dominos “Anyware” focuses on simplifying the ordering of food from their restaurants. Order a Pizza from any device – Google Home, Alexa, Slack, Facebook Messager, text, Smart TV and car (among
others). A unified identify ensures a seamless experience based on your order history and saved transaction information.

As easy as home delivery apps like Uber Eats have become, there is something to be said about making things so easy that it’s a joy for consumers to purchase your product. The experience also allows Domino’s to engage their customers across multiple touchpoints in a seamless and highly personalize way – increasing retention and CLV.

Increasing stickiness of apps and web experiences

Playing into sneakerhead culture, Nike embedded visual search functionality into its app, allowing users to take photos of sneakers worn by other people to purchase themselves.

The use of search builds off Nike’s strategy to make their app as sticky as possible. Today, you can use Nike’s App to consume stories and video content from your favorite athletes including Serena Williams, Emma Raducanu, Eliud Kipchoge, and more. These tactics give Nike greater license to engage, drive DTC sales and allow them to monetize zero- and first-party data. The Nike Running App also tracks the KMs you put into a pair of shoes so that once you’ve hit the limit, Nike is there with helpful suggestion on which shoes you should buy next.

Increasing stickiness retains your customers for longer and keep them coming back for more.

Leveraging social platforms

Snapchat, Discord and TikTok can help a brand build community and remove friction from the purchase experience.

In the U.K., Marks and Spencer has introduced live video capabilities, leveraging the expertise of their in-store associates to offer advice to consumers. Shoppers build relationships with associates through video calls, which keeps them coming back, sharing more and more personal data with each visit and facilitating retention.

Use email to add value to customer engagements

Don’t just spam them with sales offers.

BMW uses email to establish a relationship built on utility and trust right from the start. After purchasing a vehicle, a series of emails is sent to new owners helping them understand how to make the most of their purchase. No sales pitch or discount emails, just pure relationship building.

While we may have lost efficiencies with media, many companies sit on mountains of customer information they are not utilizing to drive retention. With the privacy landscape continuing to evolve, it’s important to pivot from customer acquisition powered by programmatic advertising to customer acquisition powered by retention and your most loyal customers.