The online explosion over the past number of years has seen an incredible growth in the number of businesses actively engaging in online marketing.
The digital environment is now part of your customer’s daily lives and as a result must become a core component of your advertising strategy. In doing so, your digital strategy must be profitable for you as a company. It is no longer acceptable to advertise just for the sake of it and spend 100’s of euro on Google ads or social media campaigns without seeing a return.
Anecdotal feedback is no longer enough.
Saying your website is busy when you spend money on Facebook or after you send a marketing email is not useful, nor should it be acceptable. In my 3 years working at Dmac Media, I can count on one hand the number of conversations I’ve had with companies who can clearly identify at what point they are profitable when it comes to digital marketing. More often than not, online advertising, whether it’s social media, pay per click and even email marketing, has been undertaken by business out of necessity.
I’ve lost count of the number of times where businesses have been advertising online without clearly defined conversion metrics.
From setting up online goals to transaction capturing, conversion led optimisation is an underpinning element to successful digital marketing. For the most part, however, the fault of this does not rest with the business owner. In many cases, advances in tracking software that have not been implemented, resulting in reporting inaccuracies.
Let’s take Google Ads for instance.
If you’re an eCommerce business and have not updated to Global Site Tag tracking in the past 6 months, there is a good chance your Google Ads Conversions are inaccurate. This could mean, a keyword or campaign that you might consider to be performing very well, could in fact be costing you money.
Putting conversions and conversion metrics at the forefront of your digital optimisation strategy is key.
Rather than simply counting the number of enquiries your website generates, look at the number of new customers you actually win as a result of those enquiries. In a perfect world, every enquiry your website generates would turn into a paying customer. However, it is far from a perfect world we live in, and paying close attention to the number of new customers your company on-boards will showcase the true value of your marketing efforts.
This is why we recommend utilising cost per acquisition metrics over cost per conversions in this instance. While this can prove an easy to analyse metric for an eCommerce business, it is more difficult when your business relies on sales follow ups and onboarding strategies to convert an enquiry into a customer.
We recommend that our clients go one step further in this regard. Utilising cost per acquisition metrics rather than cost per conversion can offer real insight into your digital campaigns.
What’s the difference? Well let’s examine them a bit more closely.
Conversions are anything you deem to be valuable for your business. This could include a range of behaviours from a view of your companies contact details onsite or to a newsletter sign up. Conversions tend to have a marketing objective. For instance, in the case of the Contact Page Views example above, the objective of the campaign could be to drive more telephone calls to your business.
By contrast, acquisition is actually acquiring a new customer and may take some time or considerable touchpoints. For instance, your sales team may have to deal with 10 enquiries to acquire just one customer. From an analysis point of view, this example suggests that 9 enquires were defunct and invaluable, however they cost your business money in gaining them.
Sample Brochure Website Month
Advertising Spend: €1000
Enquiries (Conversions): 50
Cost per Enquiry: €22 per enquiry
Customers Won: 10
Average Order Value: €180
Cost Per Acquisition: €100 per customer won
% Cost Per Acquisition: 55.55%
In this example the company are likely to be losing money on each customer won when admin is added as a cost. This company should strive to reduce their CPA% as soon as possible through a reduction of their advertising outlay or improvement in their onboarding strategies.
Sample eCommerce Website
Advertising Spend: €1000
Cost/Conversion (Transactions): €10
Average Order Value: €130
Cost Per Acquisition: €10
% Cost Per Acquisition: 7.69%
In this example, we see that the company was able to generate 100 orders for their €1000 advertising spend. With the average order value being €130, this represents a CPA% of 7.69%. Even without knowing the profit margins of this company, there is still a strong likelihood that this customer is going to be profitable having achieved a 7.69% CPA figure. At this point the company should look to scale up their approach but strive to maintain their % CPA as they do so to grow their market share.
So you see, the tools to track profitable customer actions are available to all online businesses, who should endeavour to use these tools whenever possible. Doing so, provides deep insight into the channels and methods that are fueling your online success or failure and help hone your marketing tactics, and ultimately increase your bottom line profits.