In the marketing area of companies, there is a clear trend to focus on customer acquisition. It is something that I have experienced on numerous occasions, most of all, because that was my job: capturing the maximum number of customers, at the lowest possible prices.
Obviously a company cannot fail to attract customers, because but it would not grow, its customers would be leaving the company gradually (there is always a percentage of churn), could not innovate because there would be no commercial pressure, nor the competition,… and the company would eventually close.
But, what happens if we focus so much on capturing and don’t pay attention to the quality of the captured customer?
Catchment in online marketing strategies: quantity or quality?
This is the ‘eternal’ discussion on digital marketing departments. We all agree that loyalty is very important, but we always end up focusing on capturing more.
A few days ago I read a post that has inspired me to return to turn to this topic.
The post talked about the use of the ‘customer value’ (customer equity)’, as a metric to measure the quality of the customer and, above all, as a way of guiding the strategy to obtain a greater margin, and therefore higher income (most of the companies objectives).
What is customer equity or customer value?
Putting it in a very simple way
Customer equity or customer value = number of customers x net revenue per customer
Or what is the same:
Customer equity or customer value = no. customers x Customer Lifetime Value (CLV)
(in the case of be valuing the quality of leads captured would be: No. new clients x CLV estimated ).
And this is calculated as follows:
Customer Lifetime Value (CLV) = revenue per customer x gross margin by customer / churn rate
(rate of cancellation of client).
To explain anything better than an example of what can happen if you don’t control this metric. If you get much but leave you little room and go fast you have a big problem. And can even be in the situation where whenever you get a customer lose money why?
If it invested in get it (CPA) is greater than what the customer leaves your company (CLV), you lose money.
(In this post I will focus on analyzing the strategies of recruitment. Obviously are equally important in loyalty (which increase the GLC and therefore the customer equity), but did not enter them, by not dwell too).
‘If on the one hand we must capture and on the other we have to take care of the quality, where is the balance?’
How to balance quantity and quality in an online marketing strategy?
We have to find a balance between quality and quantity (volume). The volume we bring liquidity and quality profitability.
In addition, as we have seen before, we must bear in mind the ‘bet’ in CPA we do to capture leads. Since or control the CLV (as do many companies with periods of permanence), or can be adding losses rather than liquidity.
That is why it is very important to be clear about what we will get if we try to capture leads on the basis of the medium that we use (paid, earned and own) and the stage of the purchase funnel or funnel of marketing in which the user is located.
What online channels provide volume and what quality of leads?
as we approach the stage of conversion (action) the user is more convinced of the purchase and the quality of leads. At this time the medium used to capture determines greater or lesser quality or volume.
I explain the reasons.
Why in some cases do we capture leads and greater quality in other higher volume?
1- Stage of the funnel of marketing in which the user is located
If we capture a lead that is in the stage of awareness (for example), with an aggressive offer, the possibilities of this user to repent of your purchase or find a better option to keep looking for are greater.
If we convince you with an offer at the awareness stage, the solidity of their purchase decision is much less than that may have a user who has gone through the different stages of the making of decision (awareness = knowledge, consideration = research and action = decision and purchase decision).
2- Some media are more suitable for quality and others for the volume
As for any strategy, media are most useful for volume and others for the quality.
By its own idiosyncrasies:
Paid media (outbound marketing) are more suitable to capture high volume, but not so good to get quality.
The media themselves and won, however are best getting leads quality, but with less volume.
In the media paid ‘interrupt’ with our message and own and earned media, users are those who come to us looking for information/trust to make your purchase decision.
3- Evolution of the mix of customers
By the evolution of the company, the volume of users of quality that we capture will be reducing.
At the beginning the percentage of users who found us by a genuine interest (own and earned media), is higher than those who buy our product by bidding or convenience.
The reason is clear. The company needs to grow, and this begins to invest more in ways that bring you that liquidity (paid media) in the form of volume of leads at a low cost (CPA).
This solves a short-term problem, but causes another to medium and long term (churn, profitability, etc.).
Marketing strategies should focus on creating audience
Difference between paid traffic and won audience
1- Paid traffic:
If we base our strategy on paid media, we will attract traffic, of greater or lesser quality depending on the stage of the funnel where they are, but it is very difficult for us to generate engagement, based on online campaigns. We are capturing traffic.
People with a relative interest in our company or product, that capture the interest-based means of payment, with promotions campaigns. As result we get a high volume of visits, but with a low conversion rate, and what is worse, with a potentially low CLV (this we need it to measure in each case to confirm it).
In addition to these main KPI, this profile of visit is quickly detected by its high rate of rebound, low time of visit, etc.
2-. won audience:
When we define a strategy to create audience (quality leads), we use the best combination of own, paid and earned media, and focus on achieving the objectives of each stage of the funnel. In this way we managed to attract the attention of people really interested in our product/service.
‘We are creating audience, which comes to us because you are interested in our product, we are not paying them to come.’
We will conducting user stage on stage, with the best strategy for every moment. In this way, users are taking the decision at your own pace (not to us).
In this way we capture leads of higher quality but at one lower volume.
As I said at the beginning of the post, the key is to balance both strategies, but having clear that we must combine paid media with other media, to try to get the highest possible quality.
Customer equity as a measure to balance the marketing strategies
To try to balance between volume and quality, we must look at the value of customer we are creating for the company and the mix of clients on the basis of their contribution to this value.
Customer equity will indicate whether our strategy is balanced or we are ‘too’ by the volume or the quality of the captured lead betting.
I.e., we will have to analyze the results of our recruitment strategy from several points of view:
Before the visit: results of our strategy out of our website in terms of yields of campaigns, content, actions, profitability, etc. etc.
During the visit, to know the quality and volume of traffic generated in terms of interaction with the page and obtained conversions.
After the visit, to analyze the quality of the lead captured in terms of profitability, CLV and finally the customer equity that it provides.