In June 2018 as the GDPR dust started to settle and people got back to business, Emarsys reached another new data milestone: we now profile more than 3 billion consumer contacts — giving us access to one of the world’s most complete data sets in digital marketing.
We have also been engaged with brands across different verticals and territories to look at what we can do to help unlock insights from these massive data sets to drive better business outcomes and experiences for the end customers.
In the August Benchmark Report, we’ll be looking at key benchmarks for the most important KPIs we see across thousands of e-commerce and omnichannel retail brands to help you make the business case you need to your leadership team to implement new strategies that will accelerate your marketing initiatives.
But first, what are the core KPIs we’re seeing across these brands?
The number-one business goal, unsurprisingly, is revenue growth. If you’re not growing, your business isn’t healthy. Investors, board members, and executives, as well as marketing, e-commerce, operational, and technology teams are all most united by this one key metric — revenue. So how are we doing year-over-year, and what’s a “good” revenue growth rate?
Across all the verticals we serve, we see a median revenue growth of 8% year-over-year (shown in Chart 1). On the top end, we see fast-growing e-commerce businesses leading the way with 41.4% revenue growth year-over-year on average — this data set excludes some of the hypergrowth brands we’re working with as “outliers” to ensure we’re looking at a more normalized distribution.
However, the data also shows just how tough it can be for businesses to keep scaling revenues — the bottom 25% on average have seen year-over-year revenues shrink by 21.2% on average (again excluding outliers). We see a lot of “bricks and clicks” retail brands within this segment, and as everyone in the industry knows, high street retail, department stores, and shopping malls are all going through a period of digital disruption — it’s key that these brands look to the best practices and “quick wins” during these big projects to make sure their revenues don’t stall or fall while they make these changes.
There has also been a material impact on brands in the run up to the GDPR/GPAA legislation in Europe, and we’ve seen this affect brands in the US, China, and across Europe as they remove data they don’t believe to be compliant with new laws. Time will tell whether these brands can recover their losses by the end of 2018, but a lot of businesses are rebuilding, optimizing and streamlining their marketing strategies as they move toward a more customer-centric model based on clear and informed consent and the right to withdraw personal data at any time.
Benchmark your revenue growth against your competitors
For many of the brands surveyed or interviewed, conversion rates are the key lever they pull to accelerate revenues — especially within e-commerce brands where it’s easier to track. However, we are seeing more offline retailers investigate conversion rates as a key “efficiency metric” to boost revenue growth. So what’s a “good” conversion rate?
Top-performing brands on average convert 15.1% of their web traffic into conversion events (e.g. sales, bookings, downloads, installs, and applications) with a median result of 7.7% (shown in Chart 2).
Top-performing @Emarsys brands convert an average of 15% of #website traffic CLICK TO TWEET
However, when we look at conversion rates over time, we do see a downward trend, and looking at year-over-year performance, the median result is an 11.1% decline in conversion rates (shown in Chart 3)
We see the bottom 25% of brands converting 47.1% LESS in June 2018 than they did in June 2017. There are many factors contributing to such a huge drop, but there are two key causes that we’d like to draw attention to.
Sorry, I know — but as GDPR has gone into effect. With it, we have seen a marked drop in conversion rates for many brands as well as drops in overall database size and web traffic as a result of sending less campaigns to fewer existing contacts. Up to 43% of EU customer data is likely to be unusable, making this a rebuilding period for many brands.
Related Content: So You Have Non-Compliant Data? Now What?
The key driver behind this is that brands marketing to EU countries have to remove existing customers from their email, SMS, push, and digital ad channels where those customers have not double opted-in (the official GDPR process of a customer giving a brand permission to market to them) and instead only completed a “soft opt-in” by clicking a pre-ticked box during the checkout process.
Too much acquisition
Many pure-play e-commerce businesses are still top heavy in terms of acquisition, and are laser-focused on growing market share primarily by continuing to draw in new customers. This has led to a decline in overall conversion rates for many brands as they prioritize scale and reach over conversion rates.
We see a clear story when we look at share of revenue by first-time versus repeat buyers across client groups. Top-performing brands have seen on average 13.4% MORE of their revenue come from returning buyers (shown in Chart 4). For the brands achieving the most revenue growth and the healthiest conversion rates, they see more and more of their revenues coming from their existing customers instead of new customers. The median result across all brands is a 3.2% increase in share of revenue from returning buyers year-over-year.
For the bottom 25% of brands, this focus on acquisition means that they’re actually trending in the opposite direction — with a 2.1% decrease in the share of revenue from returning buyers. While it’s important for young, fast-growing businesses to prioritize acquisition over retention and loyalty, we do not recommend this as a strategy. Instead we encourage brands to really focus on the post-purchase experience for new customers and build a firm foundation for long-term, sustainable revenue growth as the cost of acquisition will continue to rise in competitive markets.
“Focus on the post-purchase #CX, and prioritize #retention over acquisition to build a foundation for long-term, sustainable growth,” says @ARTimlin CLICK TO TWEET
Conversion rates across lifecycle
When we look closer at revenue contribution across the lifecycle (shown in Chart 5), we can clearly see the huge impact that the customer lifecycle stage has on overall revenues.
The key takeaways are that the median result across the thousands of brands analyzed is that 41.2% of revenue comes from new customers (conversions from new leads), so acquisition is still key to the success of all businesses.
However, the most effective brands also capitalize on that initial acquisition cost and ensure that revenue comes from both their active repeat-purchasing customers (accounting for 41.2% of revenue on average for the top performers) as well as winning back their defecting and inactive customers. The fact that the median result for a brand is to get 7% of their monthly revenue from inactive buyers should be a strong signal that even when customers deviate from BAU, seasonal sales, holiday purchases, and “anniversary of purchase” campaigns can really drive revenue growth.
Reach over engagement
Businesses have to understand revenue contribution across lifecycle stages to make sure they are thinking long-term about their engagement with customers. Moving to a more customer-centric marketing model means moving away from reactionary emergencies like sending an extra email campaign in the afternoon to the entire database because the CEO said you’re short on revenue.
One of the biggest challenges marketing teams we spoke to faced was how to make this argument to their leadership team where decisions are made based on spreadsheets, PowerPoint presentations, and hard data.
➤ Pro Tip: Think about a new metric: reach versus engagement. What percentage of your entire customer database do you reach with your outbound marketing efforts? Email, SMS, mobile push, Facebook, Instagram, Google AdWords, display ads, direct mail — these channels present a lot of opportunities to engage with a customer. But how much reach do you have in a post-GDPR world of informed consent? Go for engagement over reach.
We see that the median result for brands is that they reach 56.8% of their contact database (shown in Chart 6), but the best-performing brands — those with mature cross-channel, cross-device marketing programs — reach 86.4% of the total contact database. When you move away from the sheer number of recipients in a single campaign and look at the overall penetration of your marketing communications to identifiable customers, you can make better decisions about channel spend and customer preferences.
Timing of reach can drive engagement
Just because you can reach your audience doesn’t mean they want to hear from you every day. Despite the impressive reach most brands have, engagement is still an area we encourage you to focus on as there is a clear disconnect. The median result for brand engagement (visits to website or mobile website, using mobile apps, email opens, or purchases) is 21%, and the bottom 25% on average only see 8.2% of their database engage with them in a meaningful way (shown in Chart 7).
This means that while we have the ability to reach people with multichannel, multi-step marketing campaigns, not all contacts will engage in a given month — this means understanding the optimal frequency (number of communications) and cadence (time between communications) is essential for brands to maintain growth rates in revenue and engagement over time. Don’t burn out your database by abusing your ability to reach your contacts across various channels – customers can withdraw consent as easily as they’ve given it.
Lean on technology to scale
Understanding the optimal frequency and cadence is by no means an easy feat at scale, so we’re proud that our clients are increasingly turning to AI to help them make the decisions over which channels to send, when to send, what product, and what offer — to the extent that 39.2% of our client campaigns (median) are now scheduled and sent through the Emarsys platform using AI to predict the best time of day and best day of the week to send (see Chart 8).
Our latest update of the Emarsys platform allows you to create specific goals (such as “first-time buyer,” “repeat purchase,” or “win back defecting customer”), and the platform will look at the right number of days between communications and the right level of incentive to offer in any of our Automation Center campaigns. This means that some customers will get 10% off after 3 days and another customer will get free shipping 63 days after their last purchase — each offer and the timing of it is unique to the individual.
Benchmark your revenue growth against your competitors
Orienting Around Your North Star
As you look for new opportunities to scale your business, it’s obvious that the “north star” for most businesses is still revenue growth — but the strategies and tactics used to deliver that growth are based upon the stage of your business (start-up, scale-up, enterprise), the size of your customer database (balancing acquisition with customer lifetime value), funding (profit versus gross revenue), and value proposition (niche segment, luxury products, fast fashion, convenience) among many other ever-increasing variables that modern marketers need to deal with.
However, as the ability to collect, store, analyze, and automate data and processes becomes more and more mainstream, what’s clear is that there are more and more opportunities to make a difference. Doing so requires clarity from leadership teams to provide the north star to guide the business, great alignment with strategic sales and marketing decision-making, and effective execution.
The best-performing brands across every segment actually have less metrics in their reporting lines. Instead they maintain a dedicated focus on their customers across the lifecycle, and they lean into opportunities while resolving points of friction across many touchpoints. Ultimately these brands make sure that while they’re improving business outcomes, they’re also improving customer experiences.
Ready to uncover the metrics that matter most to your business? Visit Benchmarketing.io today.
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