A Deep Dive into Data-Driven & Privacy-Safe Customer Acquisition Strategies

Nathan Petralia offers insights into how brands can improve their data-driven customer acquisition strategies.

A good data-driven customer acquisition strategy involves gaining and applying valuable insights from marketing data. Insights improve how customers interact with your brand and products and reveal how your target audience interacts with your brand and products. Those valuable insights unlock new target segments and, therefore, will result in better-qualified leads and improved customer/sales conversions.

Why it’s important

To measure the customer acquisition strategy, there is a metric called customer acquisition cost (CAC). CAC is an important KPI for monitoring financial investment to attract more customers. It easily considers whether you are spending more on attracting customers than gaining back from them. As digital strategies grow and your next customer will always be harder to acquire than the last customer you had, your CAC inevitably is rising every year.

Therefore, it is particularly important to review CAC vs marketing spend wisely every year and ensure the investments are going into the right efforts.

 
 

On the other hand, the lifetime value (LTV) is an important KPI after the acquisition. It is wise to compare the value of your customers over their lifetime with your brand to the cost of acquiring them. Aim for at least three or more times LTV compared to CAC. That means you should at least make three times or more from your customers vs what you spend to acquire them.

If you do not have a healthy CAC vs LTV ratio, it is a clear indicator that marketing expenses and investments need a careful review and attention spent on increasing marketing effectiveness.

To increase marketing effectiveness, companies need people who can analyze marketing data and analytics and make appropriate recommendations, though finding such talents is challenging.

 
 

The Gartner – The State of Marketing Budget and Strategy 2022 report explains that more than half of the companies surveyed lack the in-house capabilities to:

  1. Understand marketing data and analytics and formulate a suitable action plan which directly influences the CAC and LTV.
  2. Understand customers and experience management, and improve customer interactions, which means the strategies to positively influence those metrics.
  3. Build and operate the marketing techniques required to execute marketing strategies, which are necessary foundations to execute the action plan.

The same report also emphasizes that customer acquisition, retention, and engagement, as well as brand building, awareness, and rebranding, are now the biggest priorities for a company CMO.



When understanding marketing data and analytics and building a suitable growth plan are top priorities, it is important to hire the right talent. Still, while doing so, and even while having the right talent in place, consider seeking help from CXM-enabled agencies and consultancies to gain a different perspective and bring in a fresh perspective for you to prioritize, validate and build your marketing strategies to most effectively lower your CAC and increase your LTV.

The impact of increasing privacy sensitivity

Besides the massive investments that brands had to make to be privacy ready, the immediate effects of GDPR and the many privacy-related regulations that followed worldwide caused a significant amount of revenue to drop because of opt-out consumers. They, therefore, reduced investments into platforms and digital infrastructure as well. Not to mention the penalties a company faces for not complying.

“Having straightforward ways to opt-in and opt-out and manage communications from a single easy-to-reach privacy dashboard builds trust. It gives the customer control over their data.”

To illustrate the effects of GDPR non-compliance, Amazon received a 636 million GBP (ca 750 million USD) fine just last year. Though there is no clarity on the details of this fine, the message here is clearly, comply or suffer.

The 3rd party cookie deprecation only adds salt to this wound. Google ran an experiment in 2019 and concluded that when disabling 3rd party cookies, the top 500 global publishers incurred a 52% revenue loss. Perhaps this is partly why Google delayed the cookie deprecation deadline yet again? In any case, privacy is important and should be respected, but this does not mean there are no ways for you to succeed in this privacy-sensitive world.

So what now?

According to Google, “92% of leading marketers believe using first-party data to continuously build an understanding of what people want is critical to growth”.

These marketers take control over their owned data as much as possible by investing in solutions that help them better understand visitors, help them convert to customers, and therefore further increase the LTV of every loyal customer. The end game here is turning customers into brand and product ambassadors, hence lowering the CAC in return as well.

“Be transparent and genuine about what data you collect and how you will use it, and give customers control over what they share with you.”

When we are looking at how to improve for better growth. A survey made by CommerceNext revealed that retailers are investing heavily into customer acquisition with improved efforts in CRM and customer experience (CXM). Those investments underline the need for better customer data acquisition, privacy-safe storage, better use across the different company departments, etc., and handing back data ownership to the consumer.

How to give power back to your customers

A good start for companies that operate outside of the GDPR zone is to still adhere to the GDPR best practices. There are lots of guides available online on “what are the steps for GDPR compliance” to get you started or you can simply ask for an external firm to audit and recommend the next steps, tailored to your own company.

To start with, be transparent and genuine about what data you collect and how you will use it, and give customers control over what they share with you. This consent does not always need to come in the form of massive banners and experience-breaking pop-ups, but can be woven and implemented smartly from the moment a visitor comes to the site for the first time, all the way to a known, returning, logged-in customer.

“Adhering to and following the industry best practices, and sharing compliance shows you take privacy seriously.”

Having straightforward ways to opt-in and opt-out and manage communications from a single easy-to-reach privacy dashboard builds trust. It gives the customer control over their data. Providing a full picture communications and data overview may also give the customer the chance to discover new segments the customer was not aware of, therefore creating better targeting and further improving your relationship with this customer.

Adhering to and following the industry best practices, and sharing compliance shows you take privacy seriously. An internal setback or a data hack can be seen as a weakness in your company security, but sharing this alongside the actions taken to do better gives you a chance to talk to your customer and shows you are keen to build trust.

Lastly, every bit of data you collect from a customer should be useful, especially the very sensitive PII-related zero- and first-party data. Do not gather data just to have it sit in a data lake, but collect data thoughtfully and only to improve the customer experience, and you will also see this positively influencing your LTV.


MORE: Dentsu International Hong Kong Promotes Nathan Petralia to Managing Director of Merkle

Nathan Petralia

Nathan Petralia

Nathan is Managing Director of Merkle Hong Kong.

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