Presented by Twilio

The modern business playbook addresses a wide range of strategies and metrics for gaining and retaining customers: lead generation, return on ad spend, conversion, customer retention, customer lifetime value.

But there is a dimension that stands apart, and that’s customer engagement. This refers to using first-party data and real-time personalization to connect with and engage customers at every stage of their journey, from prospect to buyer to user.

By breaking down silos between marketing, sales and support applications, companies that create a unified view of each customer — with highly detailed, real-time data on those customers’ activities — are able to deliver far more intimate, personalized experiences that result in higher levels of customer engagement.

Customer engagement lift, in turn, leads to increases in many other metrics. Research from Twilio has found that customer engagement is the key to unlocking customer retention, conversion and long-term loyalty.

Our recent State of Customer Engagement Report found that investment in digital customer engagement generated an average 90% revenue increase in 2023. Such investments also increased companies’ abilities to address changing market conditions. What’s more, companies that were the most advanced at customer engagement (through the use of personalization, first-party customer data, and other indicators) more easily met and exceeded their overall financial goals.

The race to capitalize on AI

Artificial intelligence is transforming every sphere of life, and customer engagement is no exception. Twilio’s State of Personalization Report found that 92% of companies are already using AI to power personalization to some degree.

But AI is only as good as its underlying data — and without good-quality data that helps brands truly understand their customer, customer experiences will continue to miss the mark. Half of companies surveyed say that getting accurate data for personalization is a struggle, an increase of ten percentage points compared to 2022. Meanwhile 31% of respondents said that poor quality data is a major obstacle in leveraging AI.

To improve AI results and personalization overall, companies need to invest in data quality, leveraging effective, real-time data management tools, and continuing to increase their use of first-party data, not third-party data “rented” from social networks, search engines or data brokers.

The power of personalization: Nextdoor case study

What does this look like in practice? Consider Nextdoor, an online platform that connects real people with one another and the neighborhoods that matter to them to build community, share information and news, and create a sense of belonging. Nextdoor is currently available in 11 countries, and in the U.S., it’s used by 1 in 3 households.

Nextdoor works with a network of advertisers to deliver ads to its audience of users. Because neighbors are influenced by their communities and often come to Nextdoor with high intent for products and services, it’s important for ads to be highly targeted geographically, with localization at the network level. Nextdoor gives advertisers the opportunity to personalize ads to individual neighborhoods, making them more relevant and authentic to the community.

Nextdoor also leverages business recommendations — over 3.9M businesses with claimed pages across the platform — to alert local small businesses to opportunities to target neighborhoods. If 15 people in a neighborhood have already recommended a particular pizza shop, the shop’s owners might welcome the opportunity to reach all 3,000 people in that neighborhood.

In a test performed in 2023, Nextdoor found that when they added a layer of personalization to their campaigns, the clickthrough rate rose by 8%. But remarkably, personalization also improved the click-to-conversion ratio by 34%.

In fact, thousands of companies are learning that personalization, when done right, supercharges their conversion rates, share of customer wallet and loyalty. Twilio’s research found that 86% of consumers say that personalized experiences increase their loyalty to brands, and consumers spend on average 21% more on brands that personalize. On the flip side, 66% of consumers say they will stop using a brand if their experience is not personalized.

Personalization, in this case, doesn’t mean putting $cust_firstname in the subject line of an email. It means delivering relevant recommendations for things a customer might actually be interested in, at the right time, through the channel that the customer prefers, be it email, SMS, or some other means. It means helping the customer accomplish goals that are meaningful to them. It means reminding them to complete a purchase they actually intended to make, not blasting them with irrelevant retargeting ads just because they stopped by your website once.

Focus on activating data

It all comes back to the data. But to improve customer engagement, it’s not enough simply to collect it: Companies need to activate that data in real time. That means making sense of it, connecting data from different sources or applications, creating unified “golden” profiles of each customer, and building campaigns and engagements that make use of that data.

Twilio’s customer engagement research suggests that brands should accelerate their shift away from third-party data and toward first-and zero-party data. Nearly one third of consumers always or often reject cookies on websites, while nearly two thirds (65%) of consumers would prefer brands use only first-party data to personalize their experiences. This also lays the foundation for brands to capitalize on emerging predictive and generative AI, by combining large language models with proprietary datasets of accurate first-party data to speed up campaign creation and better support interactions.

When it comes to personalization, invest in real-time personalization for the best results. This means delivering meaningful targeting and customization that is based on the most up-to-date data possible, including sales and product interactions.

Do all that, and your company can experience the same kinds of customer engagement benefits that Nextdoor and other leading companies have seen.

Learn how to activate your data to unlock more customer value.

Katrina Wong is VP Marketing at Twilio Segment.

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