How much are you willing to pay for a new customer?

November 18, 2009

Even in the current climate, it is surprising how many businesses don't know how much they are willing pay in order to gain a new customer (not to mention what the Life Time Value of a customer is - but that's a whole other post that we'll cover another time!) While it is apparent that many companies do have a grasp of the principals of Return on Investment marketing, they often do not have a tight grip on it, often willing to pay any price to gain a sale. While offline marketing can remain difficult to track ROI, there really is no reason that this should apply to online marketing. Here are our tips for ensuring that you are accounting for every penny of marketing spend:
  • Make sure you have some form of analytics package in place which will measure where sales / leads come from. This is not the same as a stats package that many ecommerce and website developers offer. Analytics software allows you to drill down much deeper in to how your site is navigated and how leads / sales are generated. Google offer a basic analytics package which is free to use and simple to implement. If you are looking for much more detailed analysis, there are many packages on the market such as Corematrix and Webtrends which will offer you detailed data and reports. (Like any software package, these all take time to learn before you can pull useful data out.)
  • Tag all URLs - this will be some form of unique reference which you will add to the end of every link on emails, Pay Per Click campaigns, banners etc... which can be interpreted by your analytics package and track sales back to that specific email or campaign.
  • Know your profit margins - you'd be surprised how many businesses don't. If you don't know this, you won't know how much a sale is worth to you and risk burning money chasing sales.
  • Analyse the Average Order Value (AOV) and Cost of achieving the sale (CPA or cost per acquistion) by each advertising medium, and what it is promoting. Often, a business will decide that a customer sale, no matter what should have a CPA of below eg. £5. Therefor any marketing campaign that achieves over this, does not work. This is very short sighted, and each campaign should be measured in it's own right. For example, a product or service with a profit margin of 30% may achieve a CPA of less that £5, but what about those products with a profit margin of 65% which may achieve a CPA of £7 - which campaign is the most profitable?
toinfinity digital agency offer online marketing services, including ROI marketing to businesses throughout the UK By Lol Lowe

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