I have never met a marketer who felt their acquisition sources were performing as well as they could. After hearing from hundreds of marketers about their acquisition programs, they almost always have the same three key roadblocks to improving their acquisition performance. With modern technology’s ability to manage and action Big Data, and consumer experience expectations constantly rising, there really is no excuse not to address these challenges and reap the performance rewards of more effective acquisition sourcing.
The common challenges most marketers have with acquisition are:
1. Ineffective Targeting: There is either a limited understanding of who the best prospect is to focus targeting efforts on, or that knowledge is not shared with those in charge of the targeting efforts.
2. Conversion Funnel Disconnect: Lead sources often have no visibility into who actually converts, how much they spend, and if they ever come back leaving them to focus on the top of the funnel where they have greater visibility.
3. Reliance on Vanity Metrics: There continues to be a bewildering focus on vanity metrics that no one really likes.
In many cases brands share basic demographic profiles with their lead sources to help guide their acquisition efforts but they are often overly broad and not connected to actual conversion data. When this happens, marketers end up paying as much for one-and-done customers as they are for those destined to become part of their best customer group. Audiences such as “Women age 18+” are not going to yield the best results, yet they are fairly common. One of the problems with sharing more is that brands are unwilling to provide more refined audience definitions since they know their lead sources also sell to their competitors. This creates a self-fulfilling prophecy of mediocre leads.
Marketers who are confident in their brand and prospects journeys should invest the time to build true partnerships with ethical lead sources and not treat them like a vendor. Even something as simple as providing LTV decile scores associated with previously purchased leads can provide critical information while maintaining a level of separation. Insights into who converted, and in a meaningful way, is critical to identifying leads that drive the highest value for a brand. It will also enable lead sources to focus on the best leads, reducing the volume of leads that will never convert and the number of bad leads asking “why am I getting this?”. A confident brand will have the analytics skills to identify a best prospect definition, technical know-how to get their message delivered, a gateway product / service and offer that cuts through the competitive clutter, and the marketing chops to provide a superior prospect experience. Regardless of the efforts of their competitors.
Enough with the vanity metrics! Of course, they can be useful for some top of the funnel perspective, and each marketers’ business needs are different, but most goals are conversion related. Here are 3 metrics that every business should be able to calculate and will add meaningful insight into where to spend your acquisition dollars more effectively.
Return on Investment (ROI): I can’t pay my mortgage in Impressions and I doubt you can either. If you are not looking at the return you get for your investment it is time you started doing so. I’m still surprised how few marketers can tie a ROI to their acquisition sources. The data is there, it just needs to be tied together. Keep in mind your lead to conversion time horizon may require you to look at ROI with multiple time horizons to really see where your high LTV customers are coming from. It is also important to keep in mind that the first conversion often does not lead to a profitable new customer. This has long been the case in traditional channels like direct mail, where the return rate for the second or subsequent purchases led to positive ROIs. With the immediate gratification aspect of the digital world this kind of longer-term thinking may lead some high potential audiences to be ignored or dropped. ROAS is not a good substitute. Higher level conversion funnel metrics are helpful in determining why conversions aren’t happening, but ROI will always be the king of metrics.
Average Order Value (AOV): When new customers make their first purchase they almost always spend less than an existing customer. They are testing the waters, not sure about the brand, product quality, or customer experience. In a digital world where the shopping experience is not in a controlled store environment, this axiom appears to even more true than it is in the B&M world. A lower AOV for one lead source may not be indicative of their long-term revenue potential. To understand if their purchase behavior starts to conform over time to the existing customer base, look for convergence of AOV with the existing customer base.
Return Visit Rate: Let’s face it, not everyone likes or needs what you offer. For those that do, it is important to cultivate relationships to drive repeat behaviors. Compare the % of 1st time buyers by prospect source that come back for a 2nd and 3rd purchases. If they had a bad 1st purchase, they surely won’t be coming back for a 3rd, but the ability to see how prospects develop over time cannot be captured without a longer view of their behavior. For high frequency businesses a month may suffice. For brands with longer purchase cycles or highly seasonal business, a 12-month period may be best.
While there has been some progress over the last few years in the acquisition space, the majority of marketers continue to do things the way they always have. Given where Big Data and technology stand, and increasing legislation regarding data collection and usage consent, marketers and brands that fail to revise their approach to acquisition will be left behind. The brands that continue to grow will be the ones that best leverage their data, and associated insights, to refine their acquisition programs into high performing ones.
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