Leveraging AI & First-Party Data to Acquire New, Loyal, and Profitable Customers

This is the second article of a series of blog posts where we review the full landscape of the opportunities for incorporating AI in your performance marketing strategy.

Hard truth: If you’re using AI bidding systems like Google Performance Max out-of-the-box, you are likely overspending on acquiring existing, low-value customers. 

Advanced bidding systems do a great job of hitting revenue based KPIs. But–as covered this first article– to find more profitable customers, marketing leaders must adapt these systems to focus on a better alternative: customer lifetime value.  

Why? When preconfigured to a diet of revenue figures, AI advertising platforms will do a great job hunting down the cheapest available revenue sources. But, feeding these systems with “junk food” source data like past revenue data tends to clash with long-term profitability goals.  

In other words, if you aren’t feeding your system with the right data, you may not be reaching the right customers.  

Here’s an example.  

Imagine you are an office supply vendor. You sell various products, and your platform currently optimizes toward past revenue data. 

Now, consider: 

  • Higher margins. The reality is that some products– like printers–have higher margins than others–like headsets.  
  • Low return rates. Printers also have a lower return rate, perhaps because customers tend to do a lot of research beforehand, while headsets are returned more frequently because they don’t fit. 
  • Customer lifetime value. There is a huge difference in the value of a new customer who buys a printer vs. a headset. Why? After purchasing a printer, this customer may be more likely to come back and buy ink cartridges and paper throughout the year.  

As this example illustrates, you need to optimize your machine learning tool with the correct values in order to maximize profitability. 

What Data Sources Should We Leverage to Maximize Profitability? 

Integrating first-party data, like margins, return rates, and customer lifetime value is the secret to measuring true profitability and informing bidding AIs to optimize toward it. 

This is how you incentivize your bidding system to bid higher for valuable customers – even if their first transaction falls below your average ROI target.  

Remember: Purely revenue-based optimization will not give you an edge in a competitive environment. Acquiring new, loyal, and profitable customers is critical to your EBITDA growth. 

Shed Light on True Profitability and Growth Potential with our Marketing Opportunity Audit 

Over the last 13 years, we’ve analyzed millions of dollars in marketing spend to unlock growth opportunities for our clients. And we frequently see retailers leaving money on the table… sometimes to the tune of 30M. 

The good news is that we can help you guide these algorithms with predictive intelligence to prioritize new, profitable customers.  

Our audit takes just three weeks and costs roughly less than half-day of your advertising spend. 

1. Uncover the True ROI of Performance Marketing  
Analyze the current profitability of paid media channels, looking at factors including incrementality, eCommerce (contribution) margins, and CLV. 

2. Unlock Hidden Profit/ROI Lift 
Break down your growth potential with three key levers: data activation, operational improvements, and budget reallocation. 

3. Action New Insights with a Profitability Plan 
Get a prioritized roadmap to get the most out of your paid media investment, from short-term quick-wins to longer-term strategic improvements .

Unlock Retail Media Revenue with the 2024 Sponsored Products Benchmarks Report
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