In the commercial / marketing area businesses there is a clear tendency to focus on customer acquisition. It's something we lived many times, mostly because that is our job: to capture the maximum number of customers at the lowest possible price.
Obviously a company can not fail to attract customers, because it would not grow, customers leaving the company would gradually (there is always a percentage of churn), because it would not would innovate commercial, and competition, and the company ... end up close.
But what if we focus both capture and not pay attention to the quality of the captured customer?
Recruitment strategies in online marketing: quantity or quality?
This is the discussion in digital marketing departments. We all agree that loyalty is very important, but we always end up focusing on capturing more.
The use of 'customer value' (customer equity) as a metric to measure the quality of the customer and, above all, as a way to guide the strategy for greater margin, and therefore higher revenues (Most companies main objective).
What is customer equity and customer value?
Stated in a simple way
Customer equity or customer value = number of customers x average net revenue per customer
Or what is the same:
Customer equity or customer value x = number of customers Customer Lifetime Value (CLV)
(In case you are evaluating the quality of the captured leads would be: no new customers x CLV estimated).
And this is calculated as:
Customer Lifetime Value (CLV) = Average revenue per customer x gross margin per customer / churn rate (customer cancellation fee).
To explain it any better than an example of what can happen if you control this metric. If you catch a lot but they leave you little room and go fast you have a big problem. And you can even be in the situation where each time a customer you catch why waste money?
If you invested in grasping (CPA) is greater than what the customer leaves your company (GLC), you lose money.
(In this post I will focus on analyzing the recruitment strategies. Obviously are equally important loyalty (which increase both the CLV and customer equity), but do not go in them, not to dwell too much).
If we can not fail to attract and we have to look for another quality on the one hand, where is the balance?
How to balance quantity and quality online marketing strategy?
We must find the balance between quantity (volume) and quality. The volume we provide liquidity, profitability and quality.
Moreover, as we have seen before, we have to bear in mind the 'bet' in CPA we do to capture leads. Since the CLV or control (as many companies with residence times), or we may be adding liquidity losses instead.
It is therefore very important to be clear what we will get if we try to capture leads based on the average we use (paid, earned and owned) and stage of the purchase funnel or marketing funnel where the user is located.
What you see in the matrix is based on my perception of what learned over the years in the online world. Of course there will be business models for my ratings that are not correct.
What online channels which add volume and quality of leads?
If you look at the various crossings will see that it is unwise to try to attract users who are in the stage of awareness, and we'll get a few conversions and dubious quality.
However, as we approach the conversion step (action) the user is more convinced of the purchase and the quality of leads increases. At this point the means used to capture determines a higher or lower quality and / or volume.I added caseloads advocacy stage as mere indicator of the best ways to retain and those who are not used to it (paid media).
Why grasp in some cases higher quality leads and other higher volume?
If you capture a lead that is in the stage of awareness (for example), with an aggressive offer, the chances that this person will regret your purchase or to keep looking to find a better option are greater.
If you are convinced with an offer on the stage of awareness, the strength of your buying decision is much less than that can have a user who has gone through the various stages of decision making (awareness = knowledge, research and consideration = action = decision making and purchase).Few media are more suitable for obtaining quality and other for volume.As with any strategy, means are more useful for volume and another for quality.
By its own idiosyncrasies:
The paid media (outbound marketing) are more appropriate to capture a high volume, but not so good for quality.
Own and earned media, are getting better quality leads, but with less volume.In the paid media we have 'interrupt' message and in our own we have earned message, the users who come to us for information are confident to make their purchase decision.
Evolution customer mix
For the evolution of the company, the volume of users we capture quality is reduced.
At first the percentage of users who found us through a genuine interest (own and earned media), is greater than those who buy our product for an offer or for convenience.
The reason is clear. The company needs to grow, and it begins to invest more in media to bring that money (paid media) as volume leads to low cost (CPA).
This solves a short term problem, but cause another medium to long term (churn, profitability, etc..).Marketing strategies must focus on creating audience.
Difference between paid and earned audience traffic
1 - Paid Bandwidth :
If we base our strategy on paid media, we will capture traffic of varying quality depending on the stage of the funnel where they are, but it's hard to get generate engagement, based on online campaigns. We are capturing traffic. We are capturing what strategies of media convergence is called 'sponsored customer'.
People with a relative interest in our company or product, which we capture the interest based payment media campaigns, promotions. As a result we get a high volume of visitors, but a low conversion rate, and what is worse, with a potentially low CLV (this will have to be measured in each case to confirm).Besides these main KPI, check this profile is detected quickly by high bounce rate, time on cards, etc..
2 - Won Audience:
When defining an online strategy to create audience (quality leads), we use the best combination of paid media, own and won, and we focus on achieving the objectives of each stage of the funnel. Thus we get the attention of people really interested in our product / service.
We are creating audience that comes to us why you are interested our product, we are not paying them to come.We're taking the user from stage to stage, with the most appropriate strategy for each moment. In this way, users are taking the decision at their own pace (not ours).
Thus we capture leads for quality but at a lower volume.As I said at the beginning of the post, the key is the balance between the two strategies, but taking clear that we must combine paid media with other media, to try to get the highest possible quality.
Customer equity as a metric to balance marketing strategies.To try to balance between volume and quality, we must set the value of customer we are generating for the company and the customer mix in terms of their contribution to this value.
The customer equity will tell us whether our strategy is balanced or are betting 'too' by the volume or quality of captured lead.
I mean, we have to analyze the results of our acquisition strategy from several points of view:
Before the visit: results of our strategy out our website in terms of performance of campaigns, content, actions, etc., its profitability, etc...
During the visit, to know the quality and volume of traffic generated in terms of interaction with the page and conversions obtained.
After the visit, to analyze the quality of captured lead in terms of profitability, CLV and customer equity finally it brings.