How To Rank Customers By ROI : Cost Per Order
What’s the problem?
Marketers often don’t know the cost of acquisition for each customer or each order. Marketing spend is generally analysed at an aggregate, overview level: the amount you spend versus the amount of revenue generated. This headline comparison lacks detail and if the marketing mix has any complexity at all, the results will have limited value. Most marketers can’t precisely work out how much cost is spent on acquiring each individual customer.
The impact of aggregate comparisons is that marketing decisions are made by channel, which involves scaling up or down investment in a particular touchpoint. However, marketers should instead build a user-level strategy which precisely targets customers with the highest ROI – those who generate the most revenue relative to the marketing cost of acquiring them.
Say a company acquires two customers.
- Customer A clicked on two of their adverts – one on Google and another on Facebook – before placing an order.
- Customer B clicked through from an email and placed the same order.
It’s obvious that companies should be targeting more potential customers like Customer B, as their cost of acquisition was significantly lower than that of Customer A – and they brought in the same amount of total revenue, but it’s only by understanding the detailed journey that a marketer could unearth this insight.
What’s the solution?
Rather than keeping data in siloed sources, Fospha stitches together keyword and ad-level marketing cost data to corresponding customer visits. This is then used to produce a data-driven cost of individual customer acquisition.
With this information, marketers can then take steps towards working out individual customer lifetime value. The relationship between true customer acquisition cost and customer lifetime value is a marketer’s return on investment.
Result: Marketers can clearly see the cost of acquiring every customer or receiving every order. With this information, they can clearly work out the customer’s ROI as below.
What can marketers do with these insights?
3 great hacks to drive revenue when you know your customer ROI:
1) Paid Social: Identify high-value customers, and find even more of them
Best Tool: Facebook
Firstly, marketers should rank existing customers according to their ROI. After doing that, they should create a Facebook lookalike audience consisting of the email addresses of users who Facebook deem to be similar to existing high-ROI customers, i.e. users who also like their company’s Facebook posts or share the same interests. This will give marketers a specific set of potentially high-value customers to target.
2) Paid Search: Bid adjustments to target high-value customers and exclude costly targets
Best Tool: Google Adwords
Once marketers have identified certain trends from high-ROI customers they can then target users who display the same trends with bid adjustments. Marketers use bid adjustments to decide where to show their ads according to a number of variables, such as anyone who clicks on a website from a smartphone, at a certain time of day, or from a set location. Companies can even exclude certain IP addresses with the Bid Management tool to avoid customers who might have a negative ROI, meaning they’ll be spending their money more wisely.
3) Email: Target different cost groups with relevant emails
Best Tool: Marketo
Targeting customers with the highest cost per order via email is a good strategy to try and prevent these customers from returning to via paid channels. Acquiring them through email instead will significantly reduce cost per acquisition. Marketers can also segment customers to increase the probability that they’ll re-purchase via email as opposed to paid channels.
Fospha provides its clients with an accessible, centralised, and actionable data platform. Our solution can seamlessly integrate disparate performance data siloes and present clients with a comprehensive – and most importantly – accurate picture of their marketing performance. By combining MTA with an extensive list of different datasets, Fospha provides a single interface where clients can understand how buyers are interacting with their brand, understand where they’re getting the best return on investment, and optimise their marketing strategy accordingly.