All customers are not created equally. As stated in our blog post “Reaching Customers with a Full-Funnel Approach,” typically, the majority of revenue comes from a small subset of loyal customers. If we know that all customers are not of equal value, why do we rely on campaign and marketing reports that fail to provide much-needed insights about our customers? Let’s assume you run a $10,000 campaign allocated between search and display. When the campaign wraps up, your agency provides you with reporting that shows the campaign tracked $28,500 in revenue. Many people would assume the campaign was a success based on the ratio of revenue to ad spend, but what’s missing here are key details about the customers, and more specifically, how valuable they are to your company.
Demand Customer Level Reporting
The problem with this type of campaign reporting is that we have no idea who the paying customers are. Are they first-time buyers? Or perhaps a person who is making his or her third purchase in six months? Is he or she a long-standing loyal customer? Better yet, is your ad agency actually targeting the type of customers that you’d like? Who knows, since you have no way of verifying any of this without more insightful reporting.
NY Times bestselling author, Fred Riechheld is perhaps the foremost expert on customer loyalty. Across many different industries, Reichheld’s research shows the cost of acquiring a new customer outweighs the profit derived from the customer in the early years of the relationship. He also found that a 5% increase in customer retention can increase profits by up to 95%.
Mogo decided to look at transaction data from half a dozen different companies that we work with of varying sizes to see if there were any similarities with Reichheld’s research. What we discovered was intriguing; the facts are listed below:
- Less than 1 in 5 first-time customers return to make a purchase the following year.
- By year 3, only 13.5% of customers return to make a purchase.
- By year 4, a customer spends 2.1x more money over the course of the year (compared to year 1).
- Customers that held relationships dating back to 2010 or earlier, spent more than 3x as much as new customers over the course of the year.
- 66% of sales revenue came from customers who had been customers for 4+ years.
We can conclude that it’s actually quite difficult to find and attain high-value customers. This is why it’s so important to focus your limited ad dollars on keeping your most profitable customers while targeting the right type of new ones (those which are profitable). Let’s return back to the scenario of our ad campaign from the first paragraph. So, while the campaign looks like a success on paper, it’s actually quite possible that the agency is targeting and attracting the wrong types of customers based on your overall marketing strategy, or worse yet, many of the campaign’s conversions could be coming from unprofitable customers.
The solution is taking a customer-centric approach to your campaigns, reporting, and analysis. When you have access to customer-level reporting and analytics, you can be assured that your ad campaigns are targeting and reaching the right type of people, while gaining a clearer picture of the true value of these campaigns.
At Mogo Interactive, we provide a number of advanced eCommerce and customer-centric dashboards. Our team of expert analysts is laser-focused on finding actionable insights that can help our clients make better business decisions, improve their digital strategy, and increase revenue by reaching and keeping high-value customers.