What’s Your Customer Worth?
Loved, Hated, But Never Ignored! Here I go again:
Almost all Affiliate Marketers focus on traffic sources that bring in the highest EPC. From an affiliate’s perspective, this makes perfect sense. Find placements that backout at a lower CPA than what you’re receiving, and your campaign is instantly profitable. And so long as you follow the Advertisers traffic guidelines, i.e. “No Incent,” you’re good to go. For the affiliate, it’s all about “CPA – Cost Per Action.”
On the flip side, Direct Response Advertisers are interested in a different type of CPA, the “Cost Per Acquisition.” Cost Per Acquisition calculations are based on the value of the new customer that was acquired. The customer’s value is greatly based on where, how, and by what means they were acquired by the advertiser.
i.e. On a biz op campaign, a 19 yr. high school dropout from West Virginia with 2 kids and on welfare doesn’t present much value to the seasoned advertiser. The cost of $130 to acquire this customer is not offset by additional revenues due to the fact that:
– the customer doesn’t have the financial wherewithal to pay for upsells / cross-sells.
– she lacks even a basic modicum of ambition, hence the program won’t work for her.
– buyers remorse will likely kick in and prompt a refund or chargeback
But wait! This customer was acquired through Facebook, a premium traffic source. Not so fast!! While tier-1 traffic sources like Facebook do indeed deliver awesome volumes of traffic, it is KEY to make sure you’re targeting the highest ROI Audience at the lowest possible Cost Per Action. Don’t get blinded by the lowest Cost Per Action because the Acquistion might be worthless, as we saw above.
Calculating the true cost per acquisition is NOT EASY. It takes a seasoned team of analysts, systems, and creative processes to truly understand what’s going on with your campaign.
Peter Nguyen pointed this out during our recorded call, we base all of our campaign decisions off of numbers. Peter can take a look at the numbers and know exactly what’s working on the campaign versus what’s not. From there he optimizes the campaign.
Here’s a few tips on understanding what your customer’s are worth:
1. Create detailed reports and GET GRANULAR.
Schedule reports based on the details of who your customers are. Jot down information such as state, age, and sex. If your campaign is international, segregate the reports into regions, counties, cities, domains, etc. Include the time of day, day of the week, month of the year, separate landing pages used, presale pages, CPC, CPM, CPA, etc. etc.
The devil is truly in the details.
2. Collect data. Learn and Adapt.
Unless you’re piggy-backing off of a successful campaign and have years of stats ( that’s directed to my clients :p ), you’re going to experience growing pains. Direct Response Marketing is NOT for the impatient and stingy man.
It takes time and money to create a set of stats that you can base future results off of. Most verticals take 1 full calendar year to START to understand. During that period seasoned advertisers collect data such as CLV, creative performance, peek conversion times, pricing point responses, placements, competitor’s yields, and much more.
With a solid basis of data you can accurately view the effects of new updates and changes to your campaign.
i.e. Your campaign might perform well on Mondays. You change nothing on your end but all of a sudden the campaign tanks. The month is November. Based on stats from the previous year, you determine that Diet campaigns perform terribly in the month’s of November and December. There are only a few placements that backout all year round, therefore you pause placements with the exception of the ones that perform well.
The following day you view your stats and voila, the campaign is back on track.
It’s not magic. Human beings are creatures of habit. In Scientific Advertising, Claude Hopkins shrewdly pointed out that advertising is the surest investment in the world. I couldn’t agree more!!
3. Focus Your Spend On Highest ROI Placements.
Simply put, once you have data on what placements work best, focus your entire spend on them.
I’d rather pay a $50 CPA for an acquisition of a qualified customer than a $10 CPA for an acquisition of a non-qualified customer. Then again I’d like to pay a $10 CPA for a qualified customer…that’s why I optimize 7 days a week 🙂
NOTE: If you have a handful of strong Affiliate relationships, then treat those relationships just like you would any other top tier traffic source. We still work with a handful of Affiliates direct, and the value they add to campaigns is enormous. You need to have trust and an open line of communication to make high volume affiliate relationships work. Our partners have full access to all campaign stats, including backend CRMs files. There’s a lot of trust there and they act as partners in ensuring the campaign is where it needs to be. We are happy to see them profit and are transparent about our levels of profitability. Win / Win!!