What is data driven decision making? That is a big question, and in e-commerce, there are about as many answers as there are people to talk about it.
So instead of working with fluffy descriptions and accepting half-assed ways of using data, let us have a look at what it means to be truly data driven in e-commerce.
A few years ago, most e-commerce businesses were working with a lot of guesswork and gut feelings when it came to their most important decisions. How to increase your profit, find better customers or increase their lifetime value was often based on feelings and hunches. Very far from the reality that is e-commerce today. Today, data is everywhere. The rise of social media, more complicated shopping journeys for consumers across multiple platforms and devices means tons of data. Data that is out there ready for you to be collected, analyzed, and activated to take smarter data-driven decisions.
What is data driven decision making?
Data powers almost all of the biggest e-commerce businesses today. They invest millions and millions into data warehouses and Customer Data Platforms in order to be able to become fully data-driven. But why is that? The simple answer: Data helps them understand their business and customers. They use that to drive their decisions.
Think of it this way: If you know how much profitability a certain segment of your customers are providing your business, you know how much you can afford to pay to acquire them. This is where the best e-commerce businesses stand out from their competitors. They don’t target the cheapest customers. Those are cheap for a reason. Instead, they focus on those who bring profits to their business. And when they are in; they use data to further increase the profitability of that set of customers.
Being data driven in e-commerce
Data serves as valuable insights into e-commerce customers’ behavior. If you wish to raise your conversions and want to increase sales, profitability, and better customers, you need to look at implementing a data driven decisions making strategy.
To become data driven, you need to make strategic decisions based on your data insights and analysis. And the best way to do that is by firing your rocket with high-quality first-party data for e-commerce stores. This is typically a customer data platform, as it provides endless opportunities to enable better decisions and grow your business as if you put rocket fuel in a car.
Data driven strategies are typically split in two ways of thinking of it: Data driven business strategy and data driven marketing strategy.
- Data driven business strategy is based on both internal and external data and looks at your whole business from your customer, product, and marketing data.
- Data driven marketing strategy is based on customer data. It is typically used in e-commerce because it allows you to focus on your customers, which is the main driver of your e-commerce store.
How to make a data driven e-commerce strategy
So, you wanna learn from the best and take smarter decisions? Sounds like a very good idea to me. Why don’t we talk about the different steps you need to take to become data driven and beat the e-commerce competition when the next high season kicks off!
Centralize your data
As I mentioned earlier, the first (and most important) step to becoming truly data driven is centralizing your data. All the best and biggest e-commerces do this by investing in data warehouses. But the fact of the matter is that 96% of the e-commerce market has not done it yet, or doesn’t have the resources to do so (or at least they think they don’t).
Companies obtain customer data from a multitude of data sources today. It is a good thing in and of itself. It means you have a variety of inputs and more knowledge across all platforms and channels. However, many e-commerce businesses store their data in fragmented systems. This means they wont have a full overview of what is going on, and that means they can’t make decisions based on the actual picture of a customer, or their business.
To avoid this problem, store your data in your Customer Data Platform (CDP) and use it as your centralized warehouse. With a CDP like the one from Custimy, you can quickly shoot the right data out to the right systems and take decisions and actions based on a full, holistic overview of your business.
This will help you understand customer behavior from the beginning to the end of their journey. Knowing this gives you a clear image of their behavior, preferences, and journey. And it helps you personalize their experience with you today. Something the biggest companies have gone all-in on. In fact, 71% of consumers feel frustrated when a shopping experience is impersonal. So make sure you create one to keep customers coming in these times.
Create single customer views
Personalization is absolutely key to marketing in e-commerce today. And one of the best examples of data driven decision making comes from the ability to create a single customer view.
About 70% of marketers are not able to fully understand their customers. This is a problem because it means they are wasting time and resources and missing the mark completely. The most important part of e-commerce marketing today is to provide the right customer, with the right product at the right time. That is what buying personas are for. How you can use a single customer view to do that, I will explain below:
Single Customer View provides you with deep insights on a 1:1 customer level. Use it to find look-a-like personas and enrich your advertisement to the best audiences for you.
- Understand customers on a deep 1:1 level, and target them based on behavioral data insights such as buying patterns, preferences, sizes, designs, preferred communication methods, and attribution functions.
- Improve the Customer Lifetime Value (CLV) by giving your customers exactly what they want. Improve their loyalty through a comfortable, high-quality, and personalized customer experience.
- Identify whether your customer is profitable through insights and KPIs such as total spent, predicted CLV, return rate, propensity to buy, probability of churn, and more.
- Use your insights to understand how your customers prefer to communicate. Identify the best ways, times, channels, and methods for communicating based on the highest engagement rates.
- Understand the habits and preferred products of your most valuable customers through insights into their behavior and preferences. And segment customers based on most likely to buy right now.
Marketing decisions powered by data
With a full overview of your customers that you get from your single customer view, you are in a much better position to take decisions based on data. The data will provide you with an idea of your perfect target audience and tell you how much you can afford to spend to acquire customers similar to the ones you are targeting.
But how do you do it best? Let us take a look at it.
Choose the right channel
Different buyers use different channels. So you need to make sure you are targeting your customers on the right channels that they prefer to engage with your brand on. For example, some people prefer email, while others are full-on social media users. Data can tell you how to reach them best.
The single customer view and segmentation will help you understand which channels to choose for which customers and segments to be most effective. This approach will save you immense time AND MONEY, simply because you will cut out the noise and reach your customers where they prefer to be reached. This is needed since you won’t have the same resources as Amazon or Zalando, and as such, you need to be smarter about spending your money. Wise marketing will take you far.
Choose the right timing
What if you could focus on customers whose propensity to buy is high? To me it makes no sense to advertise a white t-shirt to someone who has just bought one. But it happens so often anyways. What are the chances the person will buy a product that they just bought? Not very high.
Instead, by using data you can focus on the customers who are most likely to buy from you again. This is calculated by algorithms and machine learning and will give you a much better idea of who to target with your next campaigns.
A CDP will give you a great analysis of this, simply because of how many data points and insights you are working with. If you combine it with machine learning like with Custimy, you will know exactly which customers to target and when. That is optimization at its finest. You save money and time, and you target customers more likely to actually buy from you right now.
Execute your data-driven strategy with a CDP
In order to fully take advantage of the smarter decisions based on data, you need one single source of truth. This will provide you with a full overview of your business and that is vital in order to become data-driven in e-commerce. A Customer Data Platform is exactly that. One single source of truth, one place for all your data to be collected, consolidated, analyzed, and activated for you to make data-driven decisions.
Today, e-commerce success is dependent on how well you know your customers. Consumers today can get any service or product with just a few clicks. So in order to stand out, you need to give them experiences. And the difference between a good and a great experience comes down to personalization. And to get good at personalization, need to work with good data. That is where the CDP truly shines. It is the highest quality data you can work with in e-commerce. So in order to power your e-commerce business, you need the best data to keep growing. Especially when the market is struggling like it is now.
Why data driven decision-making matters
A quick sum-up of why you need to be data-driven today can be explained as such:
- Increased personalization
- Increased customer engagement and response
- Better reach and higher conversions
To plan a successful marketing campaign, remember that you need to have good data ready to be analyzed and processed. Once you start making full use of the available data, you’ll be amazed by the results your efforts will bring. Book a demo today and learn how you can get rocket fuel for e-commerce growth with our CDP.