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How Overstock Used Omnichannel Segmentation to Acquire Higher-Value Shoppers

As shoppers move away from traditional brick-and-mortar stores and are increasingly found on digital channels, brands need to figure out how to best allocate their annual marketing budget to accommodate their shopping experience. This is a task that’s only made more difficult for brands trying to compete with ecommerce giants like Amazon, who reportedly increased their marketing spend by a whopping 37.6% last year according to Internet Retailer. The problem facing most retailers today is how to make the most of a limited budget while still staying ahead of the competition – not merely in terms of acquiring more customers, but in terms of acquiring the kinds of omnichannel shoppers who would be more likely to engage long-term and eventually become loyal shoppers.

In order to do this, companies must look deeply into the what their omnichannel shoppers want, in order to provide a strong customer experience through cross-channel focuses. This means segmenting your customers to know who has interest, and bringing personalized messages through social media, mobile devices, and even tying in physical stores if that fits your company structure. Working on a single-channel level with minimal efforts in getting to know your customers and how to make their omnichannel shopping experience customized to them, is not the way to make the most of your marketing strategy budget.

According to Internet Retailer, one brand facing this problem is Overstock, a business chiefly known for selling surplus merchandise from other ecommerce retailers at below-wholesale prices. Though Overstock is significantly larger than most ecommerce companies – they boosted their marketing budget by 18.7% last year – they too have only so much to spend on acquisition. As a result, they needed to be extremely careful when deciding how to best use their marketing dollars in efforts to strategically improve their customer journey status and omnichannel strategy.

The solution? Thanks to their ability to track prospects through multiple channels and devices, Overstock was able to determine which shoppers were close to making a purchase, and then selectively target this group with personalized content to help them make quick and continuous purchase decision. Compared to other customer segments who were either engaging only minimally or not at all, this group of shoppers was already showing signs of interest in Overstock and didn’t need much more than a gentle push towards purchase. By collecting real-time behavioral data on all channels – including email, paid search, organic search, and mobile – Overstock was not only able to reach shoppers on exactly the right device at exactly the right moment, they could identify each shopper’s unique interests and more effectively tailor their messaging on an individual level, providing a strong customer experience.

Additionally, by using their limited marketing strategy budget to nurture this higher-value group, Overstock saw huge returns on investment with relatively low costs of acquisition. Because they were able to shift more of their marketing dollars to channels lower in the funnel and reach out to those online shoppers who have already done product research and were one step away from making a purchase. And their more conservative approach paid off – Internet Retailer reported that despite only using 8.2% of their overall revenue on marketing efforts (a significantly smaller share than that of Overstock’s competitors, many of whom will spend up to 30% of their annual revenue on marketing), Overstock generated $12.5 million in net income in 2016, a 420% gain from 2015 – landing them the No. 8 spot on Internet Retailer’s ranking of the 50 best e-retail marketers.

What does this mean for marketers today? If you’re able to segment your customers in the way Overstock did, you can more readily identify who the “right” prospects are – more specifically, the prospects who are engaging with your brand in a way that indicates they’ll be more receptive to receiving campaigns and messages that encourage a purchase. Most marketers know that the costs of acquisition should be less than or equal to a customer’s eventual lifetime value, but it doesn’t make sense to waste precious marketing resources on prospects who have shown zero interest in engaging with your brand in any meaningful way. But segmenting your shoppers to identify those closest to a purchase kills two birds with one stone – it lets you spend minimal resources for maximum gain. The messages you send to interested shoppers will end up paying for themselves in the long-run, when you see more of those shoppers returning for second, third, and fourth purchases – especially if, like Overstock did, you leverage behavioral data to communicate with them in a personalized way.

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