Data Driven: Acquisition Analysis
If I asked you how much you spent on acquiring a new client, and what that client was worth 12 months from now, how would you answer the question? Is your company routinely measuring this critical component? How does the print channel measure up to the online channel?
For every marketing channel, there are two critical components: the cost of acquiring a new client and the lifetime value (LTV) of that client. Understanding client acquisition costs, and then measuring the value of that client over time, enables you to select the optimal marketing channel combination to drive profitability.
Two key variables drive any client acquisition campaign: response rate and average order value (AOV). In general, it is easier to manipulate AOV. However, the response rate is more important when analyzing the success of a client acquisition campaign. Your ultimate goal is, after all, to acquire a maximum number of profitable new clients with a minimum of investment.
The new client acquisition costs chart (first chart in the mediaplayer) measures the cost of acquiring a new client through the print channel (a targeted rented list) and through the online channel (a banner ad). In each case, typical averages for response rates and advertising costs were used.
Clearly, from an initial prospecting viewpoint, print campaigns generally bring in more new clients, but do so at a cost. Online acquisition programs do not require the same sort of investment. Search, email and social media campaigns can be analyzed through a similar process, although the initial steps in determining the number of new clients acquired differs among the various channels.
Now, we need to look at the return each of these new clients will provide the marketer. Lifetime value (LTV) is a marketing metric applied to the existing client file to determine the value of that client over time. Typically, LTV is measured over one and/or three year periods. By identifying the repeat clients most valuable to your brand, you are able to improve your targeting of similar clients in your acquisition campaigns.