6 months ago
Are repeat purchases a thing in your business? If so, you’re leaving growth on the table if you haven’t split your paid marketing campaigns between acquisition and retention. Paid media managers usually think that their campaigns are mostly bringing in new customers. But, we see that it’s often the other way around. Conversions in paid media campaigns are mostly being done by existing customers. How can this be avoided? Well, you can split your campaigns. An example account structure in Google Ads would look like this:
If you want to push acquisition to the max (anything else should be considered underinvesting), you’ll need to have monitoring in place for customer lifetime value (LTV) and compare it to the cost to acquire new customers (CAC).
While you’ll still need a report that consolidates your acquisition and retention campaigns, you’ll also need separate reports and KPI’s. For acquisition, it’s all about bringing in new customers at a given cost per acquisition. You’ll need metrics like new customers, cost per new customer and new customer conversion rate. Retention is about maximizing repeat purchases, so you’ll need metrics like impression share, transactions, cost per transaction, transaction conversion rate and AOV.
Google Analytics has some great features and reports that you can easily leverage:
Don’t make the mistake of looking only at what’s being attributed to the channel itself. Repeat purchases will happen through organic or direct, but they’re still part of the return on investment of the channel that initially brought in the new customer. You’ll need a holistic view, looking at total cross-channel performance.
In most businesses, branded search campaigns don’t bring many incremental conversions. The exceptions are:
For other businesses, branded search campaigns merely intercept conversions that would otherwise happen though organic or direct. So, attribute value to branded campaigns accordingly. In 95% of cases, it’s fine to disregard the conversions they bring in entirely.
Take into consideration the customer behavior and configure your conversion settings accordingly. It’s often required to have a duplicate of your hard conversion, but just with different conversion settings. For example, in acquisition, you don’t want to count several conversions because somebody can only become a customer once. But for retention, you do want to count several conversions, because repeat purchases can be made more than once, so it will give a more accurate view of the actual performance. To decide on the conversion window, look at the Time Lag report in Google Analytics and Path Metrics report in Google Ads. To decide on the attribution model per conversion, it’s usually fine to use a (mostly) first click based model for acquisition and a (mostly) last click based model for Retention. If you see that there is a long customer journey before the first hard conversion, you should look into optimizing your acquisition campaigns on a relevant soft conversion instead of on the hard conversion.
If you don’t specifically exclude the client audience from the acquisition campaigns, the acquisition campaigns can still match on search queries done by clients when the ad rank is higher in the acquisition campaigns. Also, when using smart bidding, the algorithm will optimize towards better performing signals and audiences. And guess what : the client audience will show better performance, so it will be favored by the algorithm.
Usually, the goal of acquisition campaigns is to maximize new customers at a given maximum cost per new customer (CAC). So, a portfolio target CPA bidding strategy makes a lot of sense. You also shouldn’t care too much about the ROI of acquisition. It’s fine to not be ROI positive on the first purchase, as long as the repeat purchases make the ROI positive again. This is where the importance of being sufficiently aggressive in your retention campaigns comes in. You’re targeting and bidding on your existing customers, so you should be aggressive for several reasons:
This is why we start out with a bidding strategy for retention that isn’t too conservative. A target search impression share in search or an aggressive manual bid is a good starting point. You can always test bidding less aggressively or being more selective in the auctions you want to participate in, by trying a value based bidding strategy.