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The foolproof way to drive measurable business growth (that really matters)
Late last year, we introduced the concept of the “Digital Economist” with the launch of our whitepaper, The Rise of the Digital Economist. The idea really stuck.
In an era when digital is king and data is now a marketer’s best ally, everyone from the CMO down has no choice but to become a performance marketer at heart. This is underscored by the fact that digital marketing spend in the U.S. alone is set to hit $120 billion by 2021, accounting for a whopping 46 percent of total marketing investment. The key takeaway here is quite simple: the future of marketing is unquestionably digital. Today, there’s less of a focus on coming up with show-stopping Mad Men-esque “big ideas” and more of a desire to reach the right customers, on the right channels, with the right message, all at the right time. This isn’t to say that creative thinking has gone out the door. It’s just that today’s version of creativity has a slightly new vernacular: hyper-targeting, deep segmentation, real-time optimization, and personalization.
This is why the term “Digital Economist” has resonated with everyone we’ve spoken to, from our customers to our partners – and beyond. To be successful in this growing digital-first marketing environment, we’ve learned that embracing the basic principles of economics and applying it to the execution and measurement of digital marketing is the new recipe for success.
Today, we’re excited to announce the launch of our Digital Economist blog series, dedicated to helping you understand the importance of embracing a Digital Economist mindset as you plan, execute, and measure your digital customer acquisition strategies.
Being a Digital Economist is about more than just acquiring leads and conversions. It’s really all about seeing digital customer acquisition as a catalyst for business growth and profitability. And this is more important today than ever before as businesses now face a number of complex marketing challenges. For those in highly competitive industries, for example, it’s hard to manage rising costs associated with breaking through the noise. And for those entering into new markets, how to reach the right customers can feel like uncharted territory – which means it’s up to you to learn who your best customers are as well as how to target them effectively. Whatever your situation is, building a holistic strategy for driving only the most high-value potential customers along a journey with your brand – all without wasting valuable marketing dollars – should be your number one priority.
Thinking like a Digital Economist allows you to do just that (and a whole lot more!). To get your digital customer acquisition program started, ask yourself the following questions:
- Who are our most profitable customers?
- Why would someone want our business offering?
- What is the process for selling to these customers?
- How will we measure profitable growth?
These are the essential building blocks for crafting a digital customer acquisition game plan that drives measurable business growth. In this inaugural post, you’ll see how these questions translate into a series of steps that, when done right every time, can be a real game changer for your business. (And no, this is not an overstatement!)
As we continue through the Digital Economist blog series, we’ll take a closer look at each step as well as other important concepts, providing you with useful tips, advice, and case studies to help you see digital customer acquisition in a whole new – and dare we say, better – light. For now, though, let’s start with the basics. Here are the four steps you should always take to ensure your digital customer acquisition strategy drives long-term business growth.
1. Identify the Target Customer
This may seem like a no-brainer – because you can’t grow your business without customers – but being crystal clear about not only what kinds of customers you want to target but also which will likely become the most profitable for your business is really important. Unfortunately, the latter often gets left by the wayside. This is not for a lacking of wanting but the result of not knowing how to measure this (we’ll get to this in a bit).
The truth is, not all customers are going to want or need what your business offers. This begs the question: why waste precious marketing dollars on reaching prospects that never convert – or convert and then churn out quickly – when you could precisely target customers who will buy more products and services from your business and stick around for the long haul? You wouldn’t. You must truly understand who your ideal customer is, inside and out.
Start by identifying the profitability signals for your ideal customers. Think of these like prerequisites. Potential prospects who don’t meet these baseline requirements can automatically be weeded out of your “ideal customer” consideration set. Once you’ve identified this first set of criteria, the next step is to build out customer segments based on a combination of these profitability signals and other attributes – like age, gender, marital status, household income – to paint a clear picture of the exact customers you really want to engage with.
Although customer segments serve as a great foundation for targeting with digital marketing, you have to get a bit more granular than that to actually reach your most profitable customers. This is where building audiences comes into play. Adding an intent-, behavior-, or content-based targeting layer onto your customer segments can help you reach prospects that not only meet your requirements but also are more likely to be actively shopping for the solutions you offer. Building audiences is a smarter way to target – as it brings your customers segments to life in a more relevant and real-time way – and an even better way to maximize the impact of your marketing dollars.
2. Define a Clear Value Proposition
It’s nearly impossible to convince potential customers to choose your business over a competitor’s if you can’t articulate a clear value proposition for them to latch onto. This is your proverbial “hook.” Simply assuming that people already know the value your business provides – without doing any amount of hand-holding – won’t get you very far. Your target customers need you to show them why your products and services address their needs better than anyone else, how you stack up to the competition, and what unique differentiators make you truly stand out.
Defining a clear value proposition isn’t merely an exercise in outlining key features and functionality. Those only describe “what” your business does, not “how” your business delivers unique value or “why” customers should give your business a second thought. As you build out your value proposition, you must tap into what your ideal customers truly care about – their wants, needs, goals, expectations – and then demonstrate with quantifiable proof how only your products and services deliver on those core values.
Sun Basket’s home page articulates a clear value proposition – you can get organic meal kits shipped to your home which fulfills their customers’ desire to eat healthy and get satisfaction from a home cooked meal.
Depending on the nature of your business and the needs of your customers, your value proposition can take many forms. What works well for your competitor might actually not work for you, even if you have similar business models or offer similar products and services. In fact, to ensure that your value proposition resonates, you’ll want to tailor message to each of your customer segments, aligning closely to the unique needs or intent of those segments. Doing so allows you to make a more compelling “pitch” to drive meaningful clicks and conversions.
Just remember, every business is unique. Your value proposition is no exception to this rule. No business can be all things to all people – or across all of your customer segments. Having a clear and personalized value proposition will help you avoid the tendency of falling into this trap.
3. Orchestrate the Conversion Journey
So, you’ve figured out who your ideal customers are and have identified the best way to reach them through digital marketing. The rest is smooth sailing from here, right? Not quite.
A click from an ad is where the journey towards becoming an actual customer really begins. You need to get this part right because it’s essentially the “make or break” moment that decides a prospect’s fate. Will they continue through to make a purchase? Will they lose interest along the way? Do they need more information? You should be prepared with a scenario for each.
That’s why it’s critical to build out the entire conversion journey before ever dedicating a single cent towards getting leads into the funnel. Why? Because conversion journey mapping is a science all onto its own. Every step along the journey can be measured and optimized to increase your chances of converting a prospect to a customer with every click. But you can’t do that if you don’t know what that journey looks like. Similarly, as you learn more about your customer segments over time, you might find that the right approach for one segment may not necessarily be the right approach for another. Oftentimes, each of your customer segments will require a unique conversion journey of its own, tailored specifically to the needs, intent, and value proposition associate with that customer segment.
However, before you build your conversion journey, you must define a couple important variables. Start by determining your acquisition model. When prospects click your ads, are you asking them to make a purchase, provide contact information for follow up, sign up for a limited trial, or any hybrid combination of the above? There’s really no-size-fits-all here, but there are a number of reasons why certain businesses might choose one acquisition model over another. For example, businesses with low brand awareness typically offer limited trials to get more customers “into the door” quickly.
Choosing your acquisition model is important because it will almost always determine the kind of conversion event you aim to drive in the end. Conversion events typically fall into two categories: 1) Direct Conversion (shopping, free trial, freemium) and 2) Considered Conversion (lead generation, long-tail customer engagement). Identifying both your preferred acquisition model and conversion events up front are the keys to building conversion journeys that can move customers from consideration to purchase a lot more quickly. Having these pieces in place makes it easier to optimize these journeys in real-time, allowing you to create a more frictionless path to purchase that can ultimately help offset rising digital marketing costs.
4. Apply Unit Economics to Understand and Measure Value
When we first introduced the concept of the “Digital Economist,” our goal was simple: we wanted to use the basic principles of economics as a lens through which our customers could see the direct link between digital customer acquisition and business growth (or profitability). To do this, we look at a breakdown of a business’s revenues and costs – on a per unit basis – to inform how we measure customer lifetime value (LTV) and profitability on a per customer basis.
You might be saying to yourself, “But we already measure clicks, leads, return on ad spend (ROAS), and cost per acquisition (CPA) – isn’t that enough?” The simple answer: no. Looking squarely at these vanity metrics can tell you a lot about the near-term effectiveness of your digital marketing campaigns but can’t really paint a picture around profitability. They only tell you what you’re spending, not what you can actually afford (based on your business model).
This is why measuring profitability – and not relying on vanity metrics – is much more valuable to your business in the long-term. By breaking down LTV across customer segments and channels, you will clearly know the marginal cost of adding one more customer through any given channel. Aligning your marketing investments directly to channels, volume, and sales helps provide greater visibility into how you should ideally adjust your acquisition mix and conversion journeys over time. This then makes it a lot easier to optimize your marketing mix in a way that minimizes costs and maximizes revenue and profit.
The problem is, until now, there hasn’t been a good way to measure this. That’s why we looked to unit economics for the answer. Not only is it a shared language that all business stakeholders understand intimately, but it also provides an easy way to optimize or manipulate your business model and digital customer acquisition plan – working in tandem – to increase profitability.
It’s Your Turn (Almost)
We know this was a lot of information. We don’t expect you to be Digital Economist pros quite yet. However, this should give you an idea of what every business must consider when they decide to double down on creating, executing, and measuring a digital customer acquisition strategy. But these are just the building blocks. And if you’re ready to learn more about customer segmentation, check out the next blog in this series. Check back to get more tips and advice around how you can transform your digital customer acquisition efforts into a profitability powerhouse for your business.
- Digital Economist