How Spotify and Zappos Are Using Identity Marketing to Acquire Customers: Q&A With Sai Koppala of SheerID

“Identity marketing is a relatively new customer acquisition and retention strategy that leading brands like Spotify, Zappos, and YouTube have adopted.”

Sai Koppala, chief marketing officer at SheerID, talks about how popular brands like Spotify, YouTube, Zappos, and others are using identity marketingOpens a new window to drive long-term customer engagement and retention. He also discusses why identity-based marketing is a smart way to spend less on acquisition but ultimately get more sticky conversions. 

In this edition of MarTalk ConnectOpens a new window , Koppala explains how marketers can apply the “tribe” approach to their segmenting plan and how the resulting ‘social connectivity’ helps drive meaningful conversion while reducing discount abuse. He describes the best practices of identity and tribe-based marketing that’ll benefit the customer as well as the marketerOpens a new window , and highlights how marketers can leverage the approach in these difficult times of economic uncertainty as well as in the long run.

Key takeaways from this Q&A on identity marketing to acquire customers:

• Learn how to leverage identity marketing in your current acquisition and retention strategies
• Top tips on the best ways to engage and support customers with identity marketing
• Ways to facilitate the adoption of identity marketing in customer experience (CX) strategiesOpens a new window
   

Here are the highlights of our conversation with Sai Koppala of SheerID on identity marketing:

In a crowded market with limited channel options, marketers seem to be running faster and working harder to get the same results when it comes to acquisition and retention. What are customer-centric marketers possibly missing in their current acquisition and retention strategies?

Over the last few years, brands have been overly focused on performance marketing. It’s understandable, given that the results are immediate and attributable. But that’s only part of the story. Most brands use the same acquisition channels, and they’re flooding the market with universal promotions, which creates a lot of noise. Buyers are tuning out, and now performance marketing isn’t performing as well. On the other hand, the results of brand marketing have traditionally been tough to measure, and because brands have had a harder time quantifying its value, they’ve underinvested in it.

To create a meaningful connection with consumers and drive long-term retention, leading brands are rooting performance marketing in brand marketing. One technique they’ve adopted is identity marketing — an approach where you align your brand marketing (message) with the identity of your core buyer, and deliver a personalized promotion or campaign just to that consumer tribe like nurses, teachers, first responders, students, or members of the military.

Why is identity-based marketing a smart way to spend less on acquisition but to get more sticky conversions? Can you share some examples of brands that have successfully leveraged this approach and the business outcomes they have seen as a result? Are there specific industries or kinds of businesses that benefit the most from it?  

There are several reasons brands are adopting identity marketing.

1. It creates an emotional connection with the consumer, as it taps into the consumer’s identity. For example, when Lowe’s thanks military members for their service, invests in veterans- related charities, and delivers exclusive offers just to the military community, it strikes a chord within that community. And in return, Lowe’s sees higher engagement and retention.

2. With increased privacy regulations and consumers demanding more transparency, brands are adopting the use of zero-party or self-attested data. In identity marketing, the consumer is explicitly providing information about things like their interests and the social group they identify with, all with the intent to simplify their buying process and qualify for an exclusive offer. Last year during the back-to-school period, Target ran an exclusive offer for teachers. Teachers willingly provided information about themselves to gain that exclusive offer. The brand not only saw a significant jump in engagement with the offer going viral in the teacher community, it also gained a richer understanding of their customers.

3. It enables brands to align their brand marketing and performance marketing efforts. For example, Headspace, an online company specializing in meditation, is focused on social impact and targeting one group of educators, a group that is pivotal to society. There are nearly 7 million educators in the U.S., and they greatly influence our children. So, Headspace created an exclusive Headspace subscription for working K-12 teachers, school administrators, and support staff across the U.S. This type of identity-based marketing enabled Headspace to gain significant momentum in acquiring customers in the teacher community.

For Identity marketing to work, you need to map your brand’s core audience to the right consumer tribe and then provide them with a truly compelling exclusive offer or experience.

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Are ‘customer tribes’ a different version of marketing segments? How can marketers apply the tribe approach to their marketing, and specifically – to their segmenting plan? Can you explain with some examples?

The big distinction between a segment and a consumer tribe is social connectivity. A segment is based on a set of demographic characteristics (e.g., single, 20s, female, 50K income), whereas consumer tribes are based on an individual’s core identity and the sense of belonging they feel to various groups (e.g., navy veteran, ASU Student, Loyola teacher). Because of the tight social connectivity in a consumer tribe, when a brand authentically communicates with the members of that community by giving them a compelling offer or experience, the promotion goes viral! This word-of-mouth effect is an inevitable result of identity marketing, and it reduces customer acquisition costs for brands.

Why should exclusive and highly targeted offers be gated? How does it benefit the customer and the marketer? What are some other significant best practices around identity and tribe-based marketing?

Most marketers understand the value of delivering an extremely attractive offer to a targeted audience to create an emotional connection and acquire them as a customer. At the same time, marketers want to ensure they don’t cannibalize their revenue from other audiences.

Unfortunately, in our society, discount abuse is considered a “white lie”, and many consumers don’t feel guilty taking advantage of an offer they’re not entitled to. We have seen in our audits that when an exclusive offer is not gated, discount abuse can be anywhere between 30-35% of all transactions. Hence, brands gate these offers with verification to ensure they can deliver compelling offers without unwanted revenue leakage and lost margins.

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How should brands evaluate a vendor when they want to launch an identity marketing program?

We recommend that brands use several key criteria before launching an identity marketing program. They include:

1. Identity Marketing Program Management: Select a platform that enables you to easily create, test, go-live and optimize your identity marketing program. As a marketer, you want to create your own program, select the consumer tribe to focus on, develop the right copy for the offer, and select the type of coupon you want to deliver – all within your own brand experience.
    
2. Instant Verification Coverage: Your identity marketing program needs to verify users are eligible for the offer. Successful implementations introduce very little friction with instant verification that is embedded in the brand experience.  To ensure that, use a vendor that supports all the consumer tribes that would be of interest to your brand and has the highest instant verification coverage for that tribe. Beware of solutions that require your users to go to a different site to create an account, as you will see significant drop-off in conversion.
    
3. Offer Protection: Secure your identity-based programs from discount abuse and revenue leakage with flexible offer redemption rules and a variety of advanced fraud prevention techniques like digital fingerprinting, same person limits, and image manipulation.
    
4. Analytics & Optimization: Ensure you can easily analyze the effectiveness of your identity marketing program with verification analytics and conversion metrics. Optimize your conversion with re-engagement, conversion track, and A/B testing of your offer.
    

Where does an identity marketing solution fit in with the marketers’ martech stack? For example, with SheerID, would any integration be needed, say with the marketing automation system or the CDP? How involved would the IT or data team need to be with the implementation of the solution?

Most brands implement SheerID as a hosted iFrame on their e-commerce site, while others use our APIs to integrate it into their e-commerce flow. SheerID can be integrated into a variety of e-commerce and subscription platforms like Salesforce Commerce Cloud, Adobe Magento, Zuora, and Shopify. Typically, brands can go live with SheerID in a week.

What is the underlying technology and data sources for SheerID’s platform?

SheerID is a software as a service solution that is hosted in a scalable, secure, public cloud platform. Because SheerID gets explicit consent from the consumer, it can access in real-time 9,000+ authoritative data sources to verify eligibility status. The data sources vary depending on the type of verification.

When using SheerID, can brands define their own custom tribes? How would that process work, when it comes to both – sourcing (data of) the tribe and verifying the identity of (offer) respondents?

Yes. SheerID enables brands to create their own custom tribes. Typically, in those cases, the brand sources the data for their unique tribe, and SheerID leverages that data to verify the identity of the consumer.

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How does a solution such as SheerID facilitate remarketing, repeat business, and word-of-mouth exposure for their customers?

Typically, brands insert verification early in the consumer e-commerce flow, for example, prior to adding a purchase to a shopping cart. This enables brands to capture the consumer’s email and/or phone number for remarketing. This data is strictly for the brand, and SheerID does not retain any PII data.

As we discussed before, the big value of creating an exclusive offer for a consumer tribe is the word-of-mouth effect it generates. Due to the strong social connectivity within a consumer tribe, when an offer is compelling and authentic, it goes viral! We have seen this again and again across a variety of consumer tribes.

With identity marketing, brands can emotionally connect with their buyers at the level of their core identities, which in turn translates into long-term retention and repeat business. Many brands have realized identity marketing is not only the right thing to do but also good for business.

These are difficult and uncertain times for consumers and marketers alike. What, in your opinion, can brands do to best engage and support their customers and ensure their CX continues to be a sustainable differentiator?

In these uncertain times, it is easy to fall back on broad-based discounting to acquire customers. But that’s very short-sighted because it dilutes the brand and margins. It also sets the expectation that customers will continue receiving those discounts even after the economy stabilizes. Therefore, brands are using identity marketing to deliver targeted offers without cannibalizing their revenues.

We are seeing brands stepping up to provide exclusive offers to healthcare workers like nurses and doctors, who are at the frontlines of this pandemic. For example, Headspace is offering their meditation app for free to nurses and doctors during these difficult times. We are all in this together, and SheerID is enabling brands to support those in need by providing its services for free to those brands that are giving away their product/services for free.

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As we move into this new decade, what is your take on the adoption of identity marketing in the larger CX strategies of customer-centric B2C brands?

Identity marketing is a relatively new customer acquisition and retention strategy that leading brands like Spotify, Nike, and YouTube have adopted. Identity marketing is becoming a component of a brand’s personalization strategy, and brands are integrating it into their loyalty program to develop a deeper understanding of their buyer and to build an emotional connection that translates to increased engagement, transaction, and repeat business.

Thank you, Sai, for sharing your insights on how identity marketing can be used to acquire customers. We hope to talk to you again.

About Sai KoppalaOpens a new window

Sai Koppala is the CMO at SheerID. Before SheerID, Sai led a variety of marketing and product teams at global software companies like Google and SAP, as well as start-ups like Proximity (acquired by Apple) and Apigee (acquired by Google). Sai is an Electrical Engineer by training, with an MBA in Marketing from Kellogg School of Management, Northwestern University.

About SheerIDOpens a new window

SheerID is a pioneer in identity marketing. With SheerID, brands identify and acquire consumer tribes, such as the military, students, teachers, and more with personalized offers, gated by instant verification from the largest set of authoritative data worldwide. SheerID instantly verifies customers via 9,000 authoritative data sources and 1.3 billion identity attributes, provides global insights from over 200 of the world’s leading brands, and never shares or sells customer data. As a result, the world’s biggest brands, including Amazon, Lowe’s, Spotify, and T-Mobile rely on SheerID as their identity marketing partner. Founded in 2011, SheerID is backed by Arnold Venture Group, Centana Growth Partners, CVC Growth Partners, and Voyager Capital.

 

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