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Is the Cost of Acquisition Holding Back Your Growth?

Alex Timlin
Alex Timlin , VP, Client Success

Rethink the Metrics of Customer Acquisition

Digital advertising was traditionally anonymous and driven solely by Google Analytics – looking at the cost of a click, an impression, a conversion, and the value of a sale minus the cost of that initial interaction.

Then in 2012, Facebook totally changed the advertising game, and, in many ways, it’s only just now starting to hit home.

Facebook’s launch of Custom Audiences changed an already-murky world of click fraud, cookie pools, and persona-based marketing. It turned the processes that second- and third-party data networks had been using upside down. Suddenly advertisers were able to use their own first-party data to target very specific, extremely well-defined audiences.

Much of your digital advertising budget is going toward activities – display and search ads – that aren’t easy to track since data privacy and security concerns have influenced the Googles and Facebooks of the world to report based on anonymous traffic until there’s a conversion. But some of the world’s largest advertisers like P&G have called out Facebook and Google for lack of transparency in who is receiving, seeing, and clicking these ads.

Using “customer match” or custom audiences means you can target individuals and match your budget to them based on their email address or mobile telephone number – so you can finally target “people” rather than anonymous traffic.

This concept of not just targeting an anonymous persona but a specific person changes marketing analytics and attribution – but most of the brands and many agencies we speak to haven’t made the leap into working with first-party data; instead they continue to rely on Excel spreadsheets pulled from Google Analytics.

Focus on Who is Driving Your Traffic

Many marketing teams still look at how much it costs to drive traffic to their website or mobile property, how much of that traffic they convert into revenue, and the cost of attaining that revenue.

ROI is based on anonymous data – whether the traffic is a new customer, a returning customer, or a loyal customer who advocates your brand.

However, customers are not traffic, impressions, or clicks. So instead of looking at the activity – the “what” – top-performing marketing organizations are looking, instead, at the “who” – the customers driving that activity.

By understanding the value of a customer and their engagement with your brand, you can make better decisions on how much you’re willing to pay to acquire, as well as how much you’re willing to pay to retain.

Let’s say a new customer has an average order value of $10, but you know that your active repeat purchasing customers are worth $60 – how much are you willing to pay to acquire a new customer?

Do you look at the first value, the $10 you’ll get right now, or are you playing a longer-term game where you’re willing to pay more than $10 to get the $60?

This concept isn’t new – it’s how many businesses grew in the ‘90s.

What is new is the ability to supress your own first-time buyers from Display and AdWords on Facebook and Google so you can optimize your budget. You have the ability to use your customer data and what you know about those customers to optimize your marketing – so you can spend more or less based on the behaviors of your customers and their value to your business.

Drive Visibility Across Marketing Channels

Predictive analytics mean we now have the ability to estimate, with a high degree of accuracy, Customer Lifetime Value (CLV) and time-to-value — how much, on average, a customer will spend and how long it will take to realize that revenue.

Omnichannel marketing is now a lot easier to design and execute because we’re able to see “who” we’re bidding on (and, in some cases, not bidding on, meaning marketing automation provides a lot of options for optimizing costs and making budgets work harder).

A couple of tips here:

  • Use high-cost channels such as Facebook Display Ads and Google AdWords to acquire the initial contact, but use your website and mobile properties to capture the known customer data as early as possible to optimize your conversion funnels and post-purchase marketing activities.
  • Drive traffic to your website or mobile app, capture an email address, and use that email address in addition to your display retargeting to convert.
  • Once you’ve secured a new customer, exclude them from remarketing and targeting activities. Ensure they’re receiving and getting value from products or services with low cost channels such as email, your mobile app/push messages, and onsite marketing activities.
  • If engagement drops, use existing spending and past behaviors to predict future value of the customer. This will help make decisions about retargeting and remarketing via Facebook and Google Ads again, or through higher cost channels such as SMS or direct mail.

Final Thoughts

True cross-channel, cross-device customer lifecycle marketing wasn’t possible even six short years ago.

But now, thanks to that big switch from Facebook, we’ve got the opportunity to use our first-party data to bring together digital advertising, marketing, and CRM to drive better results at lower costs.

Marketing is in a constant state of change. Are you keeping up? No sweat — we’ve got you covered. We’re revealing 5 big predictions for the next 5 years, straight from the desk of the CMO: “5X5: 5 Marketing Predictions for the Next 5 Years.”

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