Value Analysis Across the Retail Sector in Performance Marketing
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Traditionally publisher s have been categorised by their primary methods of promotion. With boundaries becoming blurred it is important to assess them on their individual merits. It is now difficult to categorise all voucher code publisher s in the same way for instance, as they have different ways of driving traffic to advertiser sites and attract differing audiences.
Advertisers will have a set of key metrics which they measure the success of their campaign against. Typical metrics include but are not exclusive to: new vs. existing customer %, average basket values and lifetime value of customers. These metrics will vary from advertiser to advertiser to be in line with their core strategic objectives.
This case study looks at an advertiser that sits within the retail sector. The attributes they associate with value include new vs. existing customer %, return rate, failed credit check rate, average basket values and most importantly the cost of recruiting a new customer to the business.
New vs. Existing Customers
A common attribute that advertisers are recognising as a key performance indicator is the split of new vs. existing customers through the publisher channel. For this advertiser, internal targets are set on delivering new customers to the business.
While new customer delivery is one indicator of value, other factors also need to be considered. Simply saying the higher the split of new customers the greater the value ignores other metrics that constitute value through the channel.
This advertiser has seen voucher code and cashback sites with a high percentage of new customers. In one instance this is as high as 40% off sales are generated by new customers. This indicates the value these publisher types are able to provide in terms of new customer delivery, contrary to the myth these publisher types are more likely to convert existing customers that are looking for a discount
Returns and Credit Rejects
As the advertiser offers credit accounts, another important metric to consider is how many orders are declined due to a customer failing a credit check. Additionally, retailers will commonly receive a number of returns. A high value for each of these metrics is a negative for the business so need to be monitored closely.
The average returns rate for this advertiser from each of the top 10 publisher s is under 10%. For the top performing publisher s within this category it was as low as 2-3%.
Figures for failed credit checks varied widely from publisher to publisher . Affiliate’s with a high rate of failed credit checks could be ranking highly for credit related terms within the search engines. By using these findings, it is possible to tweak the marketing message contained on these sites to minimise the number of failed credit checks. This could be achieved by ensuring that credit terms are expressed clearly across publisher sites.
It is interesting to note that the publisher s with the lowest rate of credit check failures are cashback sites. This is indicative that customers shopping through these sites have good credit ratings. Additional research has also uncovered that cashback site members tend to have a high disposable income.
Cost of Acquiring New Customers
The cost of acquiring new customers is the key metric for the advertiser in this case study to determine value. As they only recognise new customer sales internally, their cost of acquiring a new customer also takes into account commission paid out for existing customers.
Where a publisher delivers a number of existing customers spending a lot of money, the CPA of acquiring a new customer will naturally be higher.
Without recognising the role the publisher channel plays in customer retention, advertisers may see the cost of acquiring new customers as being unusually high where they are paying out a commission for existing customers – however minimal this may be.
Additionally, this advertiser awards sales on a 1st click basis internally, however pay out on a last click model which is typical across the industry. In essence, a publisher can be paid for a new customer sale, while internally another channel is allocated the sale. Again this pushes up the cost of acquiring a new customer – with these sales not being allocated to the publisher channel while the costs are.
This comes down to a question of where publisher s add value beyond being first click in the sales process. If a customer has not converted from the first click then any additional clicks would have an element of influence over a sale. For example, incentivised sites business model is to close a sale, would the transaction have taken place without the aid of a voucher code or cashback site? Looking at the CPA associated with all new customer sales where publisher s have been paid (on a last click basis) could provide a truer reflection of the value they add in terms of new customer acquisition.
AOV of New Vs Existing Customers
A further indicator of value is how much new and existing customers are spending on average. If existing customers are spending more through publisher s should this be considered when assessing the value of the publisher channel?
It could be expected that existing customers who are already familiar with the brand would be spending more than new customers. This is the case for all publisher s investigated, although for two publisher s the difference was minimal.
Customers are spending more when they are incentivised to do so. It is interesting to note, even though there aren’t discount codes for existing customers for this advertiser, they are still spending more on average through voucher code sites. Each of the voucher code sites have a higher new customer AOV as they are encouraged to spend more in the knowledge they will receive a discount.
Similarly cashback publisher s included in this study have high AOV’s for existing customers as they are still able to earn cashback on their purchases – although this is minimal.
A high existing customer spend increases the CPA of recruiting a new customer but does increasing existing customer spend add value to the business too?
This should also be compared against other online channels to determine whether existing customers are spending more through publisher s than other channels.
Summary
The data contained in this document has allowed us to analyse the value each of the top 10 publisher s across a key programme on the network.
By looking at the KPI’s that determine the value that each publisher is adding, promotions can be tweaked to ensure that valuable customers are being delivered while driving the CPA for acquiring these customers down.
The primary objective for the campaign has been to drive new customer acquisition; however this data also investigates the importance of customer retention, and shows how returning customers are spending more through certain publisher s.
It has also challenged the model of how new customers are allocated internally. By allocating commission internally based on the first touch point of a customer, it neglects the influence that other channels may have over a customer. For example, certain publisher types (voucher code, cashback) prime their business models on closing the sale whereas others (content, comparison) are often used within the research phase of a purchase. Publishers are able to add value at each stage of the process.
One important metric that has not been examined in this case study is lifetime value of customers. While generating a number of new customers is a key objective, the Holy Grail is also retaining these customers. Publishers that are not only able to attract new customers, but attract customers who spend regularly should be rewarded accordingly.
It is important to benchmark against other channels when assessing publisher performance. This will allow for more informed decisions based on the value individual publisher s offer.
There are a number of metrics that contribute to delivering valuable customers and it is possible to reward publisher s with individual commission rates based on these metrics.