Read Time: 4 mins, 15 seconds
By Craig Brown, Head of Delivery at Incubeta US
We have developed 5 core business principles that will help advertisers CLIMB the auction rankings and start to acquire more, and higher value, customers, with the ultimate goal of increasing business profitability.
This blog is the second of a series, where we’ll deep dive into each element, moving onto Leverage. To find out more about why CLIMB was created and learn about the other pieces, check out our blog series.
Data is the most talked-about subject in marketing at the moment, but it’s one of the most underutilized as well. If anything, there’s probably too much data available nowadays, which makes it very difficult to understand where to start and how to keep moving forward. In 2016, ProPublica found 52,000 unique attributes for users on Facebook alone, which has likely grown. This doesn’t take into account what data Google and Amazon have, just to name the big 3.
This is changing with both GDPR being introduced in Europe and CCPA being introduced in California, as well as further rollouts expected across the US. This causes even more discussion about how data is evolving and how to best leverage data. Due to this, the best place to start is with first-party, as it’s the data that you have the most control over.
First of all, not all customers are equal. This is the most important thing to remember when looking at your first-party data. A significant project that you should undertake is establishing an understanding of who your most valuable customers are. Then, there are two aspects to consider: (1) how to reduce churn with those customers, and (2) how to find more people like them. Finding solutions to both of these will help increase business revenue as well as profitability since they’re likely your most profitable customers.
As you go through this process, you really begin to evaluate lifetime value, which greatly changes the impact you can have in a programmatic auction.
Let’s take a look at these changes in practice. Most businesses have a flat cost per acquisition (CPA). In this case, assume it’s $50. If you’re simply paying $50 for every customer, that doesn’t account for how much money you will make off each customer over a period of time. If you’re able to forecast, at the point of acquisition, how much money you can expect to earn from a customer, you can alter what you’re prepared to pay. When you know a customer is worth double the value over two years, you can increase your CPA from $50 to $100, allowing you to double your bid.
That helps you win more auctions, and in the instance of search, that allows you to move up the paid search rankings, potentially to position one. Now, you get more traffic and conversions from your most valuable customers, leading to an increase in long-term business revenue and profit. If you stick with the initial $50 limit while a competitor accounts for lifetime value, they are more likely to acquire the most valuable customers, leaving you with less valuable customers to acquire further down the page.
We’ve worked on this firsthand with Bonds, an Australian swimwear brand. We built a framework for establishing their most valuable customers based on their purchase patterns, whether they purchase full price or sale items, and the time elapsed since purchases. Creating these segmentations together, and applying them to our marketing efforts, allowed us to increase campaign ROAS up to four times the account average. More importantly, it helped us focus on lapsed customers, reengaging and acquiring them at a 50% lower CPA. As these customers are some of the most valuable to Bonds’ business, it really does influence their long-term profitability.
This is just focusing on your customer data. There are huge amounts of other internal data that you can use to become more advanced in your approach. When it comes to product and price data, there’s plenty you can do.
While partnering with a large, multinational retailer, we examined product inventory to determine when products were likely to sell out within 24 hours. If that was the case, we stopped advertising them. Through this, the campaign conversion rate and ROI increased by 27% and 73%, respectively. This was especially impactful as it allowed the retailer to stop wasting media dollars and focus on the right areas for advertising.
We’ve also seen success with a UK-based retailer in the health and beauty industry, which is very price competitive, especially on the reseller side. Using Google Shopping data, we identified how the retailer performed on a product-by-product basis, against all of their competitors. This then allowed us to focus on the areas where they were highly competitive or best in market price, and stop advertising in areas where they weren’t as competitive. These changes drove a 48% increase in traffic and a 63% increase in conversion rate, which resulted in ROI increasing by 139%.
These are just a few areas that touch on what you can do with your first-party data and the impact it can have on business performance, but we’ve only just scraped the surface.
We’re taking a closer look at each aspect of CLIMB during this week’s blog series, so be sure to check in tomorrow to learn about Integrate.