Wednesday, July 27, 2011

Customer acquisition at scale

This post was first published to Power Retail.

A great presentation from Florian Heinemann of Berlin based Rocket Internet discussing how to better understand marketing performance across multiple channels.

This fits nicely into step 4 of our 'Simple Business Plan for Online Retail Startups' as it goes into some detail about ways to accurately measure your customer acquisition costs.

Rocket Internet invest in some exciting European e-commerce businesses like Zalando (a Zappos equivalent in Europe), eDarling (large dating site) and CityDeal (acquired by Groupon for ~$100m).

For those who don't have the 30mins to watch it, a quick summary:

1. Most e-commerce businesses attribute a conversion to the 'last click'. If a customer sees a TV ad, then clicks a display ad online, before finally clicking on a search engine marketing (SEM) ad to convert, the sale is attributed to the SEM ad. The business will then underinvest in TV and display ads and over invest in SEM.

2. As e-commerce businesses grow, they need to start attributing conversions not just to the last click. Instead they need to attribute a percentage of the conversion to all the touch points the customer had with the business prior to converting.

3. Once your e-commerce business can attribute conversion across multiple channels, the next step is to measure the dollar value of each sale across each channel, then also measure reorder rates by channel to get the customer lifetime value across each channel. Zalando has found that the lifetime value of a customer from one channel can be as much as twice as high as a different channel.

4. With this data, you can truly measure and optimise your cost per acquisition across each channel.

5. In the questions, an audience member asked how Zalando track non-click related ads, such as a customer viewing a display ad without clicking on it or viewing a TV ad. Florian explained that this is still a challenge. They use some statistical regression analysis techniques to measure the uplift in clicks they receive when they're spending more on non-click advertising.

6. Zalando don't have a marketing budget, the will acquire as many customers as they can at or below their target cost per acquisition.

Florian makes the good point that getting into this full level of detail only starts to be worthwhile once you're e-commerce business is spending $100,000's per month on marketing. For smaller retailers like us Google Analytics have recently started trialling Multi-Channel Funnels which is a good first step in this direction.

Have you seen any other presentation or blog posts that go into detail on this topic?

via the Exciting Commerce blog.

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