For today’s CEO or CFO, marketing can feel like a dark art.
Your marketing teams should be looking for ways to spend more. Yes, you read that right. Good marketing is about spending as much as possible within your economic model to get the most profitable return.
But how do you gain clarity on what’s working and what’s not? And – more importantly – what are the key growth drivers in your business?
With a few days to go until the re-opening of non-essential retail, now is the time to make sure you’re focussing on the metrics that really matter so you can put your brand into the best position possible. Whether you’re an online-only ecommerce brand or a traditional retailer with physical stores, it’s important that your teams are aligned on the right KPIs.
A solid understanding of what those KPIs are and why they matter will unlock growth in your business. Often, we find that brands lack clarity on what the real business growth drivers are and how to leverage them effectively to unlock growth or, for brands that are already growing quickly, how to build a profitable, long-term growth plan.
Here are the 3 metrics that every CEO, CFO, and board member should obsess over. If you want to have a chat with us about how to apply this thinking in your business, drop us an email at firstname.lastname@example.org or get in touch via the form at the bottom of this page. In the meantime, happy marketing!
1. Customer lifetime value and allowable cost per acquisition
Customers are very predictable. From our work across hundreds of brands, we know that any individual’s order frequency will vary very little, making it easy to predict how much a customer is likely to spend over time. Once you know a customer’s lifetime value (and how long you can afford to wait to break even), you can work out how much you can spend to acquire that customer. This is the most important performance marketing decision you will ever make: spend too little and you’ll choke the business, spend too much and you’ll damage profit.
It’s important that your finance team and Board understand the logic behind your allowable cost to recruit. The longer you can wait to break even on a customer, the more you can spend to acquire them and the more profitable they will be in the long-term. Be careful though, as your acquisition costs and targets must be weighed up against medium-term EBITDA, cash, and stock.
And, of course, not all customers are created equal. Your allowable acquisition costs depend on a number of variables: channel, the customer’s first order value, month discounting, and the first product ordered (among many others!). Is it any wonder your CMO is pulling their hair out?
Gaining clarity and agreement on allowable acquisition cost based on revenue targets is the single most important thing on your to do list. Your marketing team should be constantly looking for ways to spend more money more profitably. After all, when you’re spending the right amount to acquire the right customers, the only limitation to growth is your capacity to fulfil orders.
2. Incremental uplift
Not every sale is influenced by marketing. It’s not a popular point of view among marketers but it’s true. And it’s why it’s so important that you and your Board understand the true incremental impact of your marketing campaigns. After all, if a particular campaign isn’t delivering incremental results, there’s no point spending your time or budget on it. But it’s worth spending time on measuring incremental uplift; accurate incrementality testing will help you make better investment decisions, will give your team more confidence in their campaigns, and will help you forecast your future revenue.
The problem is that every platform attributes results differently so true incrementality can be a tricky thing to prove. Facebook and Google make it easy to use their analysis tools but their reporting isn’t objective – Google operates on last-click attribution while Facebook counts orders on a 7-day post-click basis. Matchback analysis, robust lift tests, and a cohesive single customer view will give you a more accurate version of the truth than Google or Facebook on their own.
Are you crystal clear on which channels and campaigns are delivering incremental returns? If you’re not sure, try asking yourself where you’re going to spend your next £10,000. If you don’t know, find out.
3. Customer retention
Smaller brands need to focus on acquiring new customers to deliver growth, but retention is the name of the game for more established brands (and younger brands can learn a thing or two too!). Customer loyalty or retention is a better metric to measure than efficiency. As I said above, your marketing team should be trying to spend as much as possible within your economic model; even if marketing efficiency goes down, you’ll make more profit.
As always, the focus should be on the customer. A happy customer is the best weapon in a marketer’s toolkit as they’ll come back again (boosting your retention rate) and recommend you to their friends (winning you new customers). Bingo. But how to keep your customers sweet?
Customer lifecycle management is something we work closely on with big brands and smaller brands alike, from reducing lapse rates through more effective email nurturing programmes to establishing exactly how much a brand can afford to spend to re-activate a customer. Like with your acquisition cost, allowable reactivation cost needs to be a data-driven decision made at Board level. It’s too important to leave to gut instinct.
And while much performance marketing comes down to data, insights, and analysis, don’t forget the power of human connection. A simple thank you note or gift will go a long way towards building a real relationship with your customers – use triggers like birthdays or anniversaries to surprise and delight lapsing customers or pop a note into an existing order to show customers how important they are to you. A small gesture will make a big difference!
The wealth of data at our fingertips can seem overwhelming, as can the ever-more complex marketing jargon and new technologies. But while the ways we interact with customers is constantly changing and evolving, the fundamentals of good marketing remain the same: focus on your customer, invest the right amount in the right channels, and make sure everything you do brings an incremental impact.
I’ve worked with many brands over my career and these are the 3 key metrics that are proven to deliver profitable growth. If there’s anything here that you’d like to learn more about – or you’d like to see if more2 can help your business to grow, get in touch at email@example.com, we’d love to have a chat!
Thanks for reading!