When we talk about the difficulty of measuring the Marketing effectiveness of advertising investments, we think directly of Jon Wanamaker.
This Marketing pioneer is quoted as saying in 1922:
"I know that half of my advertising investments are spent on pure waste; the trouble is, I don't know which one."
Even though today, considerable progress has been made in Digital Marketing, it is still sometimes difficult to determine the right metrics for one's needs.
When it comes to customer acquisition, marketers look to two main metrics to evaluate their performance:
Generally, experts tend to favor one over the other, based on their various experiences in the marketing field.
For example, those who have dabbled in Affiliate Marketing tend to prefer CAC, while newer marketers who started with Facebook Ads tend to prefer RoAS.
CAC = Total Ad Spend / New Unique Customers
Customer acquisition cost is the average amount spent to acquire a new customer that is, to turn a prospect into a customer through marketing and sales campaigns.
Many B to C companies, such as startups, use this indicator to track and adjust their investment allocation.
By analyzing the acquisition processes, the most profitable channels can be identified and selected.
For example, your company invests 900,000 euros a year in sales and marketing to attract customers. You have acquired 90 new customers this month apart from contacts obtained through word of mouth. Your CAC is therefore 10,000 euros.
RoAS = Total Sales/Total Ad Spending
Return on ad spend represents an important metric in the field of Digital Marketing.
It represents a portion of the targeted euro gain on each ad as well as the appreciation and judgment on an ad and the campaign as a whole.
The ROAS, allows the marketer to keep an eye on their campaign earnings while linking them with the corresponding costs.
In addition, ROAS figures can be reported under bulletin boards, to provide decision support. This is especially useful in planning future campaigns for B2B companies.
ROAS is mostly used in B2B where the number of customers matters less than their value
For example, if you spend €1,000 on marketing and get €2,000 in sales, the RoAS will be 2. That is, for every euro of advertising spent you get €2.
You should always consider both metrics when possible, but the table below outlines the different scenarios for choosing whether you should rely on one or the other:
|
You wish to ... |
CAC |
RoAS |
Explanation |
|
Sell many different products at different prices |
X |
Provides the most comprehensive measure of profitability . |
|
|
Selling one product at one price |
X |
Increases the simplicity of the calculation |
|
|
Selling products with a cost of goods sold close to 0% (e.g. digital products) |
X |
If there is no cost of goods sold, then RoAS is the true ROI of ads |
|
|
The customer is expected to buy several times in their lifetime |
X |
The importance of RoAS is less when the first purchase pales in comparison to the customer's total lifetime value |
|
|
Determine if there has been a significant change in performance over a short period . |
X |
CAC will allow you to decouple the actual performance from the statistical variability of the average order value |
|
|
Determine if there has been a significant change in performance over a long period of time . |
X |
When measuring performance over a long period of time, the daily variability of the average order value is less important and RoAS is a more important measure. |
There are several methods your company can use to improve its CAC in its industry:
It's essential to target your campaigns to the right target audience. To do this, we recommend going beyond basic demographics.
Go further, focus on your target audience's interests, the brands they like, their behaviors, etc.
To do this, we advise you to create buyers personas. These will allow you to properly target your customers with tangible data that will be as close to reality as possible.
Here are some tips to help you identify your buyers personas.
By analyzing the data, you can easily determine when the decision is made by your prospect. If the right content misses the right time and the right person, it doesn't have the desired effect.
Don't forget that there is a direct relationship between knowing your customers and increasing the RoAS of your ads.
Questions to ask yourself:
Do your customers shop primarily on mobile or via desktop?
Do your ads perform better in the Facebook News Feed? Or during a Facebook suggested video?
Do they do better as part of the Instagram Feed or as an Instagram Story?
Keeping an eye on the data and making proactive changes is your best chance for success, which brings us to our next tip...
The goal here is to find the perfect winning combination (like the lottery) that will make your digital campaign a real success.
By performing consistent dispatch testing, you always optimize your posts for higher conversions and a better ROAS.
If you're struggling to maintain a good ROAS, or get a ROAS greater than 4x, then it's time to review the keywords you're targeting.
To drive more traffic to your website, you can use paid techniques or improve your SEO through specific actions.
SEO, or "search engine optimization" in French is about favoring natural search engine optimization.
The goal of SEO is to make Google understand that your website is the most relevant to answer the question you are asking. It is easy to understand its importance:
If you are not easily found by Google, you may be missing out on many sales opportunities
Inversely, if you optimize your site and content to have the best possible SEO, you'll attract potential customers every day
We tend to focus on the audience we want, but another way to approach the problem is to identify the audience we do not want.
Your ad is there to provoke the click, and your page is there to convince your customer to buy from your site.
If your ad is highly optimized and has been tested for conversion, you will get visitors to your page. But if your page is messy or doesn't match your ad, the customer experience is ruined and conversion is much trickier.
And even when you have a beautiful page optimized for conversion, you need to check its speed. Using free tools like Google Page Speed or others.
More than 25% of customers leave a web page if it does not load within 3 seconds according to a Kiss metrics study.
It is therefore important to optimize your page load times as much as possible.
Are there any other KPIs you use to track your Marketing performance?
Tell us in comments!