Oh right..it's the customers..stupid!

I think that one of issues I constantly hit is that digital measurement focuses on the measurement of the campaign and not the overall effectiveness of the marketing program. And typically the reason why this happens is because analysts like us tend to focus on the outcome measure; how did it move sales, how much preference did we drive, how many clicks did we get. Maybe we should be looking at the customer and creating customer metrics instead? Products per customer, customer profitability, customer satisfaction, and customer lifetime value. Surely there is no inherent contradiction between meeting the needs of consumers and achieving financial goals. In fact the two go together.

If we knew that a customer generates $100 in lifetime value you wouldn’t spend $100 acquiring them. However one of the biggest issues is that every customer is not equal therefore every customer has a different lifetime value (LTV) and cost per acquisition (CPA), and so how we market to them and how much to spend should be different.

I bank with HSBC in the UK, I see all kinds of introductory offers (with high cost per acquisition) to lure in a new customer, but there is little for the customer who has been there 5 years. I’ve yet to receive any kind of promotion, not improved terms on my credit card balance or vouchers at Christmas. How much is that really going to cost them? Not nearly as much as it would to lure me in with a “interest free balance transfer for 15 months” offer, which is why people like me have a much lower cost per acquisition on additional products and services. Let’s not even mention all the people I would tell through all my real and virtual social networks about how well they treated me, potentially adding several more new customers. Instead, I am tempted to take the competitors introductory offers. This kind of marketing does not create longevity through value, but fickleness through price.

We should never forget that lifetime value increases, as our cost per acquisition decreases. I love Virgin, (no comments please) they need to do very little and spend nothing to get me to purchase, or to refer new customers. This is where well-designed referral programs do very well. For the most part, they require little resources and the rewards create high value to the customer, but are low cost to the company. As marketers, we want to do everything possible to move customers from the low lifetime value, high cost per acquisition over to the high lifetime value, low cost per acquisition.

As part of our marketing effectiveness work we really do need to be highlighting this dynamic and making it part of how we make investment trade-offs in the future