Brand keywords might seem like a one-way ticket to conversion rate paradise. But as Director of Client Operations Donna Lagow explains, they could instead turn out to be like that plane flight from Final Destination: eventually fatal. Taken from Donna’s presentation at Digital Summit Portland.
Transcript
A big round of applause, talking about paid search, Donna Lagow.
When our marketing team, again, looks as if they’re winning at performance hitting goals, just as we Illustrated, but really they’re killing our new customer base. How can that be happening?
One of the stories that comes to mind for me is, again, in a new customer conversation, we were talking to the CMO about their overall performance, and of course goals came up and how they’re pacing against those.
So immediately the conversation was: “We have a 10% conversion rate”—this is a large e-com luxury online retailer, so… 10% conversion rate—and they cited an astronomical return on ad spend.
And our response was: “I am so sorry.” How could that be? You should not have that high of a conversion rate if you’re actually a large e-com retailer. It’s almost impossible.
So what that signaled to us was, in general, that they were targeting a way too small demographic and really not focused on growing the business and scaling. So what we then saw in their actual numbers was that they were focusing heavily on their “profitable brand terms.” And, again, I think everyone here knows that that can lead you to a very quick march to demise.
So overall we started to see this curve of their new customer demographic continue to dwindle and dwindle and dwindle, given that incentivized focus on that higher ROAS target and, again, the lower focus on new customer acquisition.
In general, the stat that you will hear often is: for new customers, it costs about 4 to 10 times as much to actually acquire that customer. It’s a heavy investment. You’re introducing yourself, basically; it’s a hard sell. You’re going to have to introduce yourself multiple times. And it’s really essential for growth. Obviously, the more new customers you get, the more existing customers that you retain. It all makes sense, right?
Folding back to the other story, in terms of how you map back to the goal, you have to segment them out. A lot of the way that we manage our goals in our agency is very heavily acquisition- versus retention-focused.
We have very specific targets in terms of the return, in terms of the conversion rates, in terms of the investment across the board, in terms of the CPCs as well. And you have to set up your spend allocation accordingly.
Overall, when you’re mapping back to the types of goals that we said, you’re really not taking into account that greater difficulty in acquiring a new customer. And the balancing scales that that lower cost of acquisition has for you on a current customer side is the thing that can be a threat overall to performance.
It’s really incentivizing marketing teams, without even realizing it, to preclude the new customer demographics. If you have a blended CPL or CPA without clear and illustrated goals for each of those, you’re likely driving your overall performance in an efficiency model versus a growth model.
How do you elude that? Overall, again, different budgets, different goals, very easy. and at overall investment in the new customer drivers. Things like display, things like high-funnel keywords.
The more money that you put there, the more long-term customers you’re going to see on the retention side as well.
And, in general, when you’re setting up goals strategically across the two types of customer demographics, you always have to measure them and segment in that way as well, so new customer campaigns can’t be evaluated on the same standards and goals that the existing customer campaigns are.