Getting the best value from your marketing in 2022

Marketing efforts to get new customers cost money, either in the form of resource budgets or media budgets (or both). This metric, known as the Customer acquisition cost [CAC] is an important commercial metric that calculates the total sales & marketing effort used by the number of visitors that convert or buy a product / service. This figure, along with Customer Lifetime Value (LTV), are probably the two most effective and comparable marketing metrics used.

Understandably most digital marketing managers also like this overall average cost to be broken down by each acquisition channel. This allows them to assess the effectiveness of each, with the usual groupings given by digital analytics applications including: 

• Paid Search - visitor clicks on a paid advert in a search engine results page
• Organic search - visitor clicks on a link in a search engine results page that can be improved using Search Engine Optimisation techniques
• Referral - visitor clicks on a link (usually not paid for) in another website

Note: when explaining this topic I should always mention the Direct channel. This is when no channel can be identified by the analytics application used  e.g. the visitor types the URL director into the browser or when the source cannot be determined). For some sites a large percentage of Direct visits can either be an indication of brand recognition or a reflection of significant offline marketing activity; but for others it could simply highlight a tracking issue with a few key inbound links.

Organic search can have the lowest CAC

Typically Organic Search still delivers a lower CAC than other marketing channels, such as paid search or display advertising. 

This has been explained in detail in many posts, e.g.

https://www.growthcollective.com/blog/customer-acquisition-cost-ads-seo

https://firstpagesage.com/seo-blog/seo-roi/average-customer-acquisition-cost-cac-by-industry-b2b-edition-fc/

Although my own word of caution when calculating CAC is that all costs must be counted (e.g. media, agency management, in-house staff coordination, etc.) not just some, if you are to properly compare "apples with apples".

Basic eCommerce Terms revisited

When you work in the digital and eCommerce consulting industry, there's the tendency to assume that the person you are speaking to always has enough experience to be able to understand what your saying and act accordingly. However, this is not always the case (e.g. when the person has just been moved or promoted into a new role) and sometimes it takes time to cover the basics with a client, even though you don't always want to make it too obvious.

I therefore thought I would revisit some of the more common eCommerce terms used. Not just in case a current or potential client was reading this blog, but also to help anyone else who may be venturing in the world of online transactions, etc.

Acquisition

The processes and tools used to get new customers to start using / visiting any digital company touch-point (e.g. website, app, social media presence, etc.). Acquisition rates can be increased by using different marketing techniques (e.g. paid advertising or search engine optimisation).

Example KPI = Website visitors

Conversion

The amount of people who complete a required online goal (e.g. a booking or a purchase) divided by the total number that visit. It is sometimes called the 'look to book' ratio and in some markets / companies it is one of the most protected (e.g. Secret) of figures.

Typical average conversion  rates by industry:

http://www.marketingsherpa.com/article/chart/average-website-conversion-rates-industry

Retention

The number of customers who come back to the digital channels and book/purchase again within a given time period (sometimes set as the entire customer lifetime) .
There are no recognised benchmark figures on digital customer retention that I'm aware of and this depends considerably on industry, product, customer type, etc.

AOV:

Average order value is typically the sum of revenue that has been generated divided by the number of orders taken. Again, there are no standard measures for this, as the range of products and prices vary from company to company.

Insight, the one digital metric we don’t measure

I hope that by now most large company execs by now will have heard of the existence of website analytics. Some (especially the more marketing and technology focused) may even have seen dashboard reports from their analytics suites.

These displays of graphs and numeric tables can help the senior team quickly get an idea of the value of their digital channels, with ‘Goals’ (online results such as sign-ups or purchases) and ‘CPA’ (Cost per acquisition) figures being obvious KPI’s to get regular updates on.

These hard and fast numbers can go a long way to dispelling half-truths, rumours and ‘gut feel’ that humans instinctively use when there are gaps in their knowledge.
Note: I still see and hear of execs citing ‘hits’ as a great indicator of online greatness, with no understanding of how this figure is derived nor the understanding that traffic without purpose just creates a burden on IT infrastructure more than anything else.

Receiving and reviewing these dashboards might be one way of checking the digital success of an organisation, but a few pie charts and year-on-year comparisons does not even start to show the key output that needs comes out of these figures… insight. Insight that your digital analytics team (perhaps only made up of one person or even just part of a role somewhere) should be craving to provide

Measuring facts from all your digital touch-points is now possible and relatively easy in the online world. You insert a tag or two into each page (or action) of your website and sit back and watch the numbers scroll before your very eyes. Real-time reporting is now a reality, with even the free packages such as Google Analytics telling you where, when and what your visitors are doing at every step of their connected customer journey. But gaining insight from these figures is a different matter and measuring the value of this insight is exponentially more difficult still. Perhaps that’s why to-date it isn’t measured

But actually, it is...kind of. Insight derived online reports can show up in all sorts of ways, usually when there is a feedback loop from this data back into the business, for example:

• Geographic data about where website or app visitors are coming from can inform business strategy. Imagine the mergers and acquisitions team knowing which counties the biggest increases in valuable business traffic have recently come from
• Significant differences in the search engine keywords entered by users to reach your sites can predict market or investor trends. Data that could be of potential use to many central functions, including finance, proposition and commercial teams
• Site bounce rates can not only inform your User Experience team of potential issues, but can reflect on product price, content quality or site speed (or a possible combination of all three plus other factors

It’s a shame however that this contribution to the organisation can’t be effectively measured. You can’t really put a price on the provision of internal data within a company, without coming up with some sort of mad model that will be more hypothesis than fact… the very thing thatdigital analytics tries to constantly minimise

Yes, but do you build websites?

On a call with a business prospect a few weeks back, I began to get the feeling they really didn't understand either what they wanted or what myself & my team could offer.

Why? Well here's a rough precis of the conversation I had:

Them: "So why should we hire you?"
Me: "We are a team of digital consultants and delivery experts, who have a wealth of online experience across the creative, user experience, commercial, marketing and technology disciplines".
Them: "So tell me about your recent experience with Internet technology"
Me: "Oh, that's a pretty big topic and I don't know what technology we are talking about yet, so I'll talk conceptually"
Them: "So you don't understand about Internet technologies then?" [some scribbling].
Me: "Yes of course we do... however I don't know the details of your systems so cannot dig into the detail. Would you like me to give you an overview of our systems experience?"
Them: "Oh, I thought you understood about these things" [rapid scribbling]
Me: "Yes... Err, we do. Do you have a specific piece of work in mind?"
Them: "We need to improve our customer journey"
Me: "Great, we can review your key personas and user flows, then identify the major drop-off points to optimise your goals"
Them: "So can you tell me how you would improve our customer journey?"
Me: "Oh, as I said... we'd look at your conversions, acquisition paths, hopefully review your analytics and suggest quick wins as well as longer-term improvements" [a small scribble]
Them: "We've been told that we need to improve the customer journey and that we need a content management system. What you've told me doesn't sound like a Content Management System"
Me: "Err... No, what I've explained is our process to deliver site improvements. We can also deliver a CMS for you, design and develop a multi-channel interactive platform and ensure it is delivered then marketed in the right way to meet your KPI's"
Them: "Yes, but do you build websites?

You're not focusing on digital retention? Why?

So, even in these austere times... Companies still seem to be focusing more on customer acquisition than retention.

Perhaps it's because retaining customers is seen as less interesting and 'glamourous' than the various customer acquisition processes and tools out there. Or maybe it's because the tools and techniques for retaining customers have now reached a decent level of maturity (e.g. Email is usually the main eCRM tool and best practice around: creative, delivery and measurement are all understood pretty well).

Either way, I think there needs to be a shift in the marketing priorities of a lot of companies and away from acquisition. The race to be top of Google via PPC and SEO techniques can put a big dent in marketing budgets. These £'s spent might be palatable now... but maybe not when compared with the pence to retain customers.

Please note that I'm not completely advocating a radical diversion of all your marketing budget across to retention activites. What I am suggesting however is that if it costs many times as much to get a new visitor compared to getting back an existing one... That companies should balance their marketing spend accordingly.