5 min read

Retailers are Prioritizing CDPs in 2023

Sarah Wheeler
Sarah Wheeler
Updated on
January 17, 2023

As retail media is growing, there are hundreds of potential ad tech and martech solutions helping retailers sell more products and maximize their ad spend. While retail media networks are a 100B ad industry, and are expected to grow 60% by 2027, as the whispers of “recession” get louder, “growth at all costs'' is over. With budget cuts and layoffs everywhere, retailers are being more cautious before buying new tech. Companies are prioritizing efficiency, wondering: “Which tech solutions will most help me scale effectively? Which ones will stand the economic test? What is the right tech to help me find the best customers for my brand?” 

To drive cost-effective sales, retailers are looking to CDPs (Customer Data Platforms) in 2023 to make the most of their site visitors. Marketing teams are thinking less about how to drive more customers to the website, but instead, how to make the most of the visitors they have. If consumers are slashing budgets, retailers need to know which products/content to show to which users to drive high conversion rates and increase lifetime value rates in order to turn a profit on such tight margins. Retailers want to find not just any new customer, but more of their best customers, which can be obtained by a CDP. In this article, we’ll discuss the retail CDP movement, and why smart companies should get on board with this trend sooner than later.

First, what’s a CDP? 

A CDP, according to the CDP institute, is defined as “packaged software that creates a persistent, unified customer database that is accessible to other systems,” and has three main pillars:

  1. Software: A CDP isn’t a data storage or warehouse, but a SaaS product.
  2. Unified customer database: A CDP links information from disparate sources, uses this data to unify and identify users, segment them into audiences based on shared attributes, and target those audiences. 
  3. Accessible to other systems: A CDP can share data and audiences with other systems. 

A CDP is not to be confused with a DMP (which typically uses third-party data) or a CRM (which is for managing company contacts).

Essentially, a CDP helps with three main functions:

  1. Data collection: Collecting first-party data on a company’s websites and apps
  2. Data segmentation: Organizing data by user or shared traits
  3. Data activation: Pushing those segments back to the site or app for user-level targeted promotions/ads
CDP explainer image

Why would retailers need a CDP? 

CDPs are common (43% of brands have a CDP and 31% are working to implement one). But why does a retailer need one specifically?  Retailers might find a CDP useful if they:

  1. Want to collect shopper first-party data. Data collection can be tricky in the first place for many brands. If a retailer doesn’t yet collect information about users based on their clicks, purchases, returns, and site activity, a CDP can help with this first step.
  2. Want help organizing their data. Once you have the data, it can get messy quickly. Being able to effectively match data to a user and identify user journeys isn’t easy, especially for less technically-minded marketing teams. CDPs are built to sort, manage, and organize data effectively. 
  3. Want to target promotions to high-value customers. Brands often want to tailor user experiences to their preferences. For example, a 35 year old woman who likes pilates and dogs should receive different promotional offers than a 60 year old man interested in watercoloring and jazz. Retailers want to make sure that the right person sees content that will drive conversions based on real historical and predictive data that a CDP can offer.
  4. Want to find new high-value customers. CDPs help brands know who their most valuable audiences are, and find more users who fit that audience to find likely-to-buy browsers. 

At the end of the day, retailers want to know information about their shoppers like:

  • Likelihood to buy
  • Likelihood to open, click and unsub e-mails
  • Next purchase date
  • Churn factor
  • Product Recommendations
  • Category, Brand, Price and Size affinities
  • Predicted to do X 

All of which, a CDP enables. Retailers want to make sure they have the right customer insights so they can better personalize their experiences and drive more sales.

If retailers are slashing budgets, will CDPs make the cut?

It’s true–the past few quarters have been less than ideal even for major retailers. AP news reported that in Q3 of 2022, “Shares of Target tumbled 11% and other retailers slid as well. Macy’s and Kohl’s fell more than 8% and Nordstrom slumped more than 10%. Walmart’s shares were flat.” Profits are dropping, and with that, non-essential tech will be cut.

Retailers know that customer acquisition is always more expensive than customer retention. So instead of focusing on getting just any customer, retailers need to focus their efforts on retaining high-value customers and finding new ones like them. To do that, they need to:

  • Know what high-value customers have in common.
  • Know purchase patterns of high-value customers.
  • Use that information to target customers on and off site.

How can a CDP help with this? Let’s use Target as an example.

Insider reports: “Target's typical shopper is a white suburban mother between 35 and 44 years old. She typically has some college or a 4-year degree education with a household income of $80,000.” 

First, a CDP can help identify the main customer’s common traits. Target’s typical high-value customer has these shared attributes: white, suburban, mother, middle-aged. A CDP could help find much of that demographic data through purchasing history, geographic data, previous behavior, etc. If the majority of shoppers have this in common, Target knows who their main customer is.

Next, a CDP can help link high-value customers to purchasing patterns. If these middle-aged women often purchase yoga pants and shirts together, that data can help Target create better promotions. If Target identifies a new woman visiting the site and buys yoga pants, Target knows promoting  shirts might help drive higher sales.

target example

Finally, Target will want to maximize their efforts on finding more high-value shoppers. If 60% of white suburban mothers shop at Target, imagine how their sales would improve even by acquiring and retaining 10% more of white suburban mothers. Knowing the right customer attributes can help narrow Target's targeting online and off-site.

Additionally, Insider found that most of these high-value customers come every two weeks and average seven items. Imagine if Target could move the average to 8 items by carefully targeted promotions at the right time? Increasing the amount of items purchased per one customer is much more cost-effective for Target than finding new customers, and these increases can be done simply by promoting the right products at the right time. 

In 2023, retailers will be finding ways to maximize the customers already on their site by offering relevant internal promotions and site experiences. And, they’ll maximize their ad and marketing budgets by knowing their best customers and using that information to target offsite.

CDPs hold their value

At the same time, CDP customers find themselves satisfied with their CDP, meaning CDPs aren’t going anywhere soon. Most found a higher ROI with a CDP, and their CDP resulted in more optimized spend. According to Tealium, “More than half of marketers said payback was achieved within 6 months and 4 out of 5 saw positive ROI within 12 months.”

cdp results

Not all CDPs are created equal for retailers 

There are hundreds of CDPs out there, and each have their strengths. However, a select few are catered to retailers, helping retailers generate customer insights, profiles, audiences, and user targeting created for driving purchases. You'll need retail-specific segmentation, RFM analytics, and more to maximize your personalization. To find the right insights for your retail needs, reach out to Kevel today.

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