DMEXCO 2013 In Review, Part I

Customer Data Was King at This Year’s Digital Marketing Expo and Conference in Cologne

2013-07-26-164127-EditThe dmexco 2013 was my 10th edition of the show and I am happy to report that the event surpasses itself year after year.  It’s always a fantastic opportunity to meet and exchange knowledge with online marketers from all industries, and 2013 was certainly no exception. This year, the audience was particularly international, with far more visitors from North and South America than in the past.

We were very happy to have the opportunity to host plenty of customers, partners and new contacts at our booth in Hall 7. With our booth designed by Christian Gröschel, we  told the story of our own “vision turned into reality” — the organic growth of our company over the past 12 months. We received great feedback from our clients and partners who agree that adopting a unified, data-driven approach to programmatic display across desktop, mobile, and Facebook Exchange is a key focus for eCommerce marketers across verticals and regions.

Huge thanks to everyone who took the time to stop by our booth to talk programmatic, and especially to those who were putting out good words about Sociomantic across the show — sustainable partnerships are our mission, and it’s your affirmation that empowers us to grow.

For those of you who weren’t able to make it, here’s a quick recap of the seminar we hosted on the first day of the show.

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Seminar: “eCommerce, Online Marketing, & the First-Party Data Advantage”

It was a pleasure to welcome Florian Heinemann, co-founder and Managing Director of Project A Ventures, on stage with us for a fireside chat about how advertisers can use their first-party data to drive revenues in the short and the long term.

After an introduction from our CEO Jason Kelly explaining the development of programmatic buying over the last years, we dove deep into some of online marketing most advanced topics and Florian’s  experience in growing successful eCommerce ventures.

Programmatic Buying: Then & Now

“Data-driven display is one online channel where you can still achieve significant growth and differentiate yourself,” explained Heinemann. According to him, search — despite it’s central status in the eCommerce marketing mix — has become commoditized in many ways, so that data-driven display gives marketers a chance to make an additional impact on their revenues. The success of some of the fastest-growing eCommerce companies is based not only on television penetration, as many speculate, but also due to the fact that they know how to reach their audience and close the deal with display ads.

In the past, only companies with a huge budget and a broad target group were able run performance-based display campaigns. Programmatic buying, specifically real-time bidding, has made it possible for smaller advertisers to reach their target group without having to run large and wasteful “spray and pray” campaigns. Today, companies of almost any size can put their data to work and make display campaigns perform.

Measuring Customer Lifetime Value

At Sociomantic, we started to discuss the usage of the Customer Lifetime Value (CLV) with our clients in 2011 to help them understand how they could begin to adapt a long-term view of the customer. Today, more companies are taking this KPI into account, especially eCommerce advertisers. Heinemann reported that nearly all the companies he works with are using this metric to some extent, simply because it  helps them predict and measure an individual customer’s value over the course of their lifetime as a customer, instead of focusing on single transactions only.

Over the past months, we have seen the concept of RFM (Recency, Frequency and Monetization) become more common knowledge among our clients. In addition to an explanation of these basic dimensions that allow an advertiser to calculate the CLV, Florian added some strong advice on how to begin implementing a CLV-focused marketing strategy.

The Project A startups begin this process by collecting as many different data dimensions as possible on a per-customer basis immediately after the website launch. Later they use these dimensions to create a scatter-plot of users that exhibit similar traits, in order to group the users based on potential lifetime value.

For example, at Wine in Black, they discovered that the CLV of a red wine buyer was typically higher than a white wine buyer — red wine is typically more expensive, and red wine buyers buy more often. These kinds of trends help marketers to understand how certain products are connected to lifetime value, and according to Heinemann, one of the fashion shops he helped to launch has become so adept at using these metrics that the team can predict a user’s CLV with 90 percent accuracy based on the first purchase. With this level of data understanding, even the return rate per product category is sometimes predictable through statistical analysis.

Once you have a clear understanding of the potential CLV of a customer, you have the power to make a bigger investment in marketing to that customer, even if the returns might not be immediate. It’s a way to justify increased marketing investment in the short term for sustainable growth in the long term.

The Development of CRM Segmentation

“There is a lot of confusion around big data,” said Heinemann at the start of this section. He went on to clarify for the audience that advertisers are usually dealing with two distinct categories of data: structured data, such as their existing CRM data, and unstructured data, typically referred to as “big data.” He emphasized that there is a huge value for marketers in first making sure that they leverage the full value of their existing structured data — which is much easier to work with — and then move on to the big data challenge.

If companies optimize their online marketing based on CLV, they will automatically adapt a strong focus on generating new customers. Existing customers should then be sorted into different CRM segments according to the above-described CLV calculation process.

Once again,  advised to collect and store as much data as possible from the beginning. On the other hand, he recommends to keep it simple — segmenting your existing users into ten segments might give you as much as 80 percent increase in value, but from his perspective, starting small already goes a long way in increasing the efficiency of marketing investments. The longer a company exists, the more CRM groups can be defined. These groups can then be targeted with specialized pricing and messaging strategies across different online channels.  On pricing, each group can be assigned its own target CPO (cost per order), based on CLV.

Programmatic display shows a special strength when it comes to CRM segmentation, because it is one of the few channels that already allows advertisers to market not only to large segments, but  to market to literally “segments of one” — each user has an individualized pricing and messaging strategy based on his or her real-time user profile.

Facebook Exchange & the Emergence of Pro’Ganic Marketing

Over the last year, Facebook has become an efficient channel for eCommerce, especially with the launch of Custom Audiences and Facebook Exchange (FBX).

“While Google allows you to reach the best audience based on interest, Facebook offers you to reach the best audience based on demographics,” said Heinemann about Facebook’s Custom Audience feature. For companies who know their exact target groups, this can be a competitive advantage. On top of that, FBX allows eCommerce marketers to reach website visitors on a global scale using their own first party data for retargeting.

With the possibility to run programmatic ads in the Facebook newsfeed, the lines between display and social are disappearing, and we are seeing the emergence of what we call “Pro’ganic” marketing – programmatic + organic.  To learn more on this topic, check out Jason Kelly’s blog post about his participation in “The Social Commerce Debate.”

Programmatic Mobile & Cross-Device Strategies

The final topic discussed in the seminar was programmatic display for mobile. Heinemann confirmed our experience that traffic on mCommerce sites is growing rapidly, especially due to the growing usage of tablets for shopping.

According to Heinemann, some of his ventures are already generating 30 percent of their sales through mobile devices, and the launch of a mobile app has become a big priority. From his perspective, apps are a great way to engage existing customers. He also reported that customer acquisition costs are often lower on mobile devices because there is less competition than on desktop.

All of Heinemann’s observations sync up with the trends we’ve been seeing across regions with our eCommerce partners. There is an increased interest in running mobile and in-app campaigns and a strong focus on running device-agnostic campaigns that can reach 100 percent mobile inventory — especially on iOS devices, which account for 57 percent of mobile transactions in the U.S. today.

As we have been running dynamic display campaigns on mobile devices since 2010 (thanks to HTML5 instead of Flash-based ads), we were happy to share our experience.

We agreed that a key challenge — and opportunity — is the ability to recognize and categorize users across different devices. Heinemann reported that one of his ventures was able to significantly increase the efficiency of their online marketing once cross-device tracking was in place because it allowed them to identify an additional 15 percent of the visitors as existing customers rather than new customers, which meant they could adjust their investment in these users accordingly.

All in all, this was a very informative seminar from one of the most admired professionals in the online marketing business.

Huge thanks to Heinemann for his participation and the valuable insights he shared in this seminar. Thanks as well to the audience for the great feedback and please get in touch if you’re interested in learning more about how Sociomantic can help you leverage your first-party data to drive more sales through programmatic display.