Increasing ARPU as a Competitive Strategy

B2B - B2C E-Commerce Marketing Personalization
by Heidi Unruh

E-commerce continues to heat up and even though it appears that Amazon has hoovered up market share, a recent article suggests that its core business is slowing, with legacy retailers building up their own e-commerce operations. Like Amazon, successful online retailers are focusing on increasing average revenue per user (ARPU) as a competitive strategy not just to establish themselves in the online commerce space but also to flourish. ARPU is easy to calculate: simply divide total monthly recurring revenue by the total number of units sold, and you get the average revenue per user.

In 2017, U.S. e-commerce ARPU was $1,749 and is expected to grow to nearly $2,600 in 2022. (Statista) Now, with new marketing tools available such as AI Personalization, Natural Language Generation, and content + commerce solutions, online retailers have even more opportunity to increase ARPU and go head-to-head with Amazon. Let’s take a closer look!

How AI Personalization helps increase ARPU

AI-powered personalization creates dynamic digital experiences that consumers crave. In fact, Accenture’s 13th annual Accenture Strategy Global Consumer Pulse Research report found that 43% of U.S. consumers are more likely to make purchases with companies that personalize experiences, and 31% report finding great value in services that automatically learn about their needs to personalize recommendations. Meanwhile, 41% of consumers switched companies over a lack of trust and poor personalization, costing businesses $756 billion. (Mediapost)

Fortunately, according to a white paper from analyst firm Ovum “AI systems have access to a wealth of data and can analyze it to enable marketers to make better decisions. AI solutions can combine first-party and third-party data to better understand customers’ needs, preferences, and interests. AI algorithms can combine historic patterns and behavior (plus “look alike” patterns) with ongoing real-time engagement to provide the right next best action to the customer at the right time and in the right context of their journey. The outcome for the consumer will be recommendations and offers that are personalized, well targeted, and relevant.” The result? An increase in revenues and ARPU.

For example, featured on techemergence is a case study on a company called Luisaviaroma (LVR), which wanted to increase customer retention and revenue and provide both machine learning-powered recommendations and flexible merchandising rules. By using personalized add-to-cart recommendation emails, LVR optimized recommendations on its “Thank You” page, and urgent low stock emails, “LVR achieved a 15-percent average revenue per user (ARPU) increase from personalized add-to-cart recommendations…a 14-percent ARPU boost on their “Thank You” pages with the addition of recommendations, and a six-percent ARPU increase from targeted urgency messaging.”

In fact, AI-driven personalization can boost revenue with the right product recommendations at the right time. For example, you can increase user retention and session length by inserting data-driven product, content and email recommendations at critical touchpoints and drop-offs, and allow the AI-powered recommendations engine to optimize for goals such as “maximize conversions per user” or “maximize purchases” by showing similar, popular, high-grossing or related products. As well, personalized recommendations can be automatically created based on viewing history, prior behavior, real-time intent and more.

What’s great about smart personalization is that the ROI benefits aren’t just limited to ARPU. A guide on the ROI of personalization demonstrates:

  • How Sephora achieved a 6X return on investment
  • How Lamoda drove $15M gross uplift
  • How Sabon increased sales by 35% during Black Friday Weekend
  • How Jewelry.com increased ARPU from the homepage by 39%
  • How BILD Shop realized a 5X ROI from a single use case
  • How Juniqe increased SEM campaign revenue by 20%

For more information on AI-driven personalization, read e-Spirit’s blog post on AI-Powered Personalization at Scale Becomes a Reality for Marketers, watch the webinar Personalize or Perish: AI-Driven Digital Experience Personalization for a Competitive Edge and read how e-Spirit can help create AI-powered personalization for dynamic digital experiences.

Let’s Talk about Natural Language Generation

Natural Language Generation (NLG) is the intelligent, automated creation of content at scale, and is increasingly being used by corporations to improve internal productivity while boosting user engagement. What makes NLG especially interesting is the possibility of automatically generating as much content as possible with human-like accuracy, in multiple languages, and in a short period of time -- for far better efficiency and economies of scale. The trick is leveraging an untapped asset that companies already have: metadata. NLG automatically creates text using structured data. In this way, product description text, for example, can be created for ten different products, or 10,000. Creating text at scale in milliseconds is what makes NLG is unbeatable. One of the easiest ways to incorporate NLG into your content creation is through a Digital Experience Platform or CMS.

Making NLG part of your digital experience also helps to improve ARPU. Our CMO said it best when he wrote in ChiefMarketer that “Tapping into the power of NLG gives marketers the ability to improve digital experiences, reduce costs, streamline operations and raise the quality of content. The hidden value lies in the fact that marketers drastically reduce the time it takes to produce content, which allows them to develop more compelling stories about how customers are using a company’s products, and personalizing content for a digital experience edge. And the ultimate value NLG gives marketers is increased revenues and average revenue per user (ARPU).”

For more information on Natural Language Generation, read e-Spirit’s blog posts on Automated Content Creation Using Natural Language Generation and Natural Language Generation: The Future of Content Managementand read how e-Spirit offers NLG as part of its digital experience platform.

How Content + Commerce Drive ARPU

With so many audiences, products and channels comes the need for a huge amount of content, and both AI-based Personalization and Natural Language Generation are driving the future of content management. Increasing integration between content management systems and e-commerce systems results in delivery of compelling, personalized, content-rich e-commerce experiences, helping to increase revenue, average revenue per user, and overall marketing ROI.

According to Neil Patel, “Without conversions, your store won’t survive, no matter how many people are visiting. Content marketing can increase your conversion rate by almost six times! The average conversion rate with content marketing is 2.9%, compared to only 0.5% for sites not using it.” That’s because commerce systems alone can’t deliver the experiences customers expect when shopping, whether online or in-store. It takes content—videos, images, text, illustrations, and so on—to tell stories that make your products come alive. True engagement comes only when content and commerce are strategically united—and that’s how you get an e-commerce edge.

To learn more, read our blog post about 5 e-Commerce and Retail Strategies to Survive and Thrive, read about e-Spirit’s Salesforce Integration, and discover the power of content-driven commerce.

Closing Thoughts

Today’s retail environment is tough with companies such as Amazon who routinely out-price competitors while giving consumers more and more innovative ways to do business with them. What you can do to differentiate from the pack, drive premium pricing, and become the vendor of choice is to deliver the kinds of experiences consumers are looking for – personalized, content-rich touchpoints that drive brand loyalty, increased spending, and ultimately, higher average revenue per user.

Want to see how the FirstSpirit Digital Experience Platform can help make your 2019 a profitable one?

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About the author

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Heidi Unruh
VP Marketing North America

unruh@e-Spirit.com