Multichannel Success Podcast series

Season 1 Episode 2 - Customer Acquisition - Transcript

# Introduction

#### Mark Pinkerton

Welcome to our podcast series on how to drive multi-channel success. In this

series, we're looking to explore a range of issues which you and your business

are faced with every day. Today, the three of us from PROSPRO and The Multi-

Channel Expert have pooled our expertise and experience of working with many

brands over the last 20 years to come up with a set of practical suggestions

and ideas that will help you deliver greater success in your e-commerce

business. We really hope you find the discussion useful, and we look forward

to your feedback. In today's episode, we're going to explore the critical area

of customer acquisition. I'm delighted that today we have David from The

Multi-Channel Expert, and David, and myself Mark from PROSPRO.

Hello and welcome. As we're talking about customer acquisition, I'd like to start with

the big question of what do we mean by customer acquisition? David.

#### David Kohn

Well, from my perspective, it's pretty straightforward. In any e-commerce

business, you're gonna drive your business from a combination of existing

customers and new customers. So what we're fundamentally talking about today

is how do you drive new customers? And that starts with the driving of

traffic, but also obviously involves conversion. But for me, it's about

driving new customers, and to some extent, it's about driving sales from some

of those previous customers. It's a bit difficult sometimes to define an

existing customer, but some of those previous customers who may not have

bought from you for some time.

#### David Worby

I guess also, from a slightly different lens, it's a measure of how efficient

and effective your business is in the way it spends its money, which is often

seen as marketing money. If the purpose is to drive sales, one could argue

that the people that give you sales are customers, and they hopefully give you

multiple sales over a longer period of time. But it's a measure of how

efficient you are at getting your new customers to transact with you.

#### Mark Pinkerton

So what are the main influences with customer acquisition? What is influenced

by customer acquisition?

#### David Worby

Well, I think one of the big elements that businesses are facing today is how

do I make my marketing money efficient? How do I make sure that every pound

I'm spending is driving the results I want? Now, that's easy to say and kind

of difficult to do, but one of the areas that is often seen as kind of

discretionary is marketing money. It is very easy for businesses to withhold

marketing money because it can be withheld. One of the things that's really

important about customer acquisition is helping the business to understand the

consequences of reducing budgets and therefore the impact into sales. And the

best way to measure that is to understand that a reduction in budget is likely

to impact your ability to acquire customers and therefore impact your sales

negatively.

#### Mark Pinkerton

So how should we think about customer acquisitions, David?

#### David Kohn

Yeah, one of the ways that I've looked at it pretty well everywhere I've

worked and some of the companies I've consulted for is to look at the sales

funnel. And it starts with three principal statistics, if you like, one of

which is awareness. So have people heard of your business? Do they know the

name? The second thing, which is critical, is sentiment and consideration. So

they might have heard of you, but what do they think of you? Would they

consider you as a viable supplier for the product they're looking for? And

then the third thing is reason to visit. So you've got to provide as many

reasons as you possibly can for customers to visit you. We're going to look at

why one or other of those may be more important to you at any given point in

time, but if you haven't got awareness, if people don't have a view of what

your brand is, if you haven't got reasons to visit, you're simply not going to

drive traffic and you're not going to drive new customer acquisition.

#### Mark Pinkerton

Is there anything you'd like to add at that point?

#### David Worby

I think what David said is spot-on. It wasn't that long ago that it was

very common for businesses to split what's perceived as brand marketing from

performance marketing and I think what David's articulated here is how

important it is to see them as connected functions because ultimately what

gives you the opportunity to drive performance marketing is what your

potential customers think about you and their level of an awareness about you

so you have to have a joined-up funnel when you're thinking about this in the

modern era.

#### David Kohn

Yes, and if I might just add to that, David, I think a lot of people have

grown up in digital marketing, have grown up with a very statistical approach,

it's a very ROI based approach. And so as a consequence, we've tended to

favour the channels like PPC, and paid social. I think what we're seeing now

is more of a requirement to drive awareness and consideration, and almost a

reversion to some of the traditional marketing skills of brand building, of

creating a positive image. And I think it's a really important skill for

digital marketeers to learn, or indeed relearn.

#### Mark Pinkerton

So where we've got the potential for actually combining brand marketing and

performance marketing in a more holistic way than perhaps some organizations

have set themselves up to do, how would you actually want to drive sentiment?

#### David Worby

Well, this is a really good question and I think it's kind of one of those

soft sciences. It's really about the DNA of your brand and finding a way to

tell that story in a way the consumers want to listen to it. So it's as much

about the language you use as it is about the products and services that you

offer. So for example, how do your customer service team respond to incoming

calls and emails is just a bigger driver of what people think about you as the

tone of voice that you use on your website or in your marketing. So it's

really a challenge to look across the whole gamut of what you do and determine

whether the way you're doing it is driving a positive sentiment. So for

example, if you're answering the phones within a reasonable time frame, if

you're responding to emails in a positive and constructive way within a time

frame that's reasonable, you're probably beginning to do things that drive

positive sentiment. If however, you're ignoring stuff and not responding in a

customer-centric kind of way to the inputs your business is getting, you may

begin ultimately to be perceived as not being customer-centric and therefore

drive negative sentiment towards your brand. Yeah, and we're going to come on

to that.

#### Mark Pinkerton

Yeah, and we're going to come on to measurements in a little bit.

#### David Kohn

I think, again, if I might add to that, the driving of brand

awareness and brand sentiment has become more difficult, I think, in many ways

over the years as people's attention span has reduced. So typically, people

are seeing a far greater number of adverts presented to them and the time that

they spend looking at them is minuscule. So if you're a brand and you want to

create a story about your brand, how are you going to do it in the minuscule

amount of time that you have available? I know we're talking to one of our

friends from TikTok later on who may be able to shed some light on this, but I

do think it's one of the fundamental challenges in this low-attention world

that we live in today.

#### Mark Pinkerton

Yeah, that makes a lot of sense. And what about the sort of natural growth

rate that has happened for digital over the last 10 years? You know, we're all

used to the environment where digital has been growing. We've now hit a

situation where post-Covid, where actually certainly e-commerce has been

negative for a couple of years, but traffic has been all over the place. So

this you'll take home.

#### David Kohn

Look, there's no doubt that it creates greater challenges. When I started in

e-commerce, you could reliably turn up to work and have 25, 30% growth without

lifting a finger. Nowadays, there are many sectors in which digital traffic is

down and where it becomes far harder to acquire new customers. But that just

means that the challenge for established businesses is slightly more

different. It becomes more about efficiency, it becomes more about mix, it

becomes more about optimization. And let's not forget, there are plenty of

businesses that are still growing fast and are capable of growing fast. And

their challenges are different. They've just got to find their customers,

they've got to get the right messaging out to them, and they've got to provide

the reasons for those customers to visit. So...

#### Mark Pinkerton

Yeah, and as the market as a whole, the cost of doing that is going up all the

time.

#### David Kohn

Absolutely, the cost per acquisition pretty well across every sector has gone

up. So again, it's all part of the challenge, even to stand still now you've

got to work a lot harder than you ever used to.

#### Mark Pinkerton

So it's funny that you mentioned CPA because I'd like now to move on to

measurement. So how do we measure or focus an organisation onto customer

acquisition?

#### David Worby

Okay, so if we go back to the original kind of sales funnel, being about

awareness and sentiment, and then the second element being about traffic and

about the conversion of traffic, they all require different ways of measuring

what's happening. Clearly, the first two are less about pounds and sales.

They're more about sentiment and analysis. There are a widespread number of

tools in the market that you can think about acquiring that will measure the

degree to which awareness is becoming positive or becoming negative, and

similarly on sentiment too. But don't forget that there are ways you can

construct your own, if you like, DIY measures of awareness, simply by using

some Google Trends that are free, simply by asking your customers pre-

formatted questionnaires about what they think about you. They will give you

valuable feedback. So whether you're in the market to acquire some software to

tap into the market and give you statistical awareness and sentiment stuff, or

whether you just want to create your own internal measures, the most important

thing is that you're measuring trend. So if you start to measure six things

around sentiment and your score is, let's just say, 50 out of 100, I would

argue that doesn't matter. What does matter is that within a month, 50 has

moved positively to 51 or 52, and you can show a positive trend in sentiment,

#### David Kohn

Yeah, when looking at measurement, and I think all of us in this room have

broadly agreed on this, is when you're looking at your marketing spend in

total, the key thing you've got to be looking at is cost per acquisition.

You're not going to get the same cost per acquisition across each individual

channel, but you should be looking across your program as a whole to have a

target cost per acquisition, how much you spend versus how many new customers

you drive. And I think one of the things that we're all agreed on in this room

is that the central measure that you can use and the real focus for all of

your marketing efforts is cost per acquisition. And you should really have in

mind across your overall marketing program what your target cost per

acquisition is. Of course it's going to differ by different channels, of

course it's going to differ by different customer groups, but when you're

looking at your budget as a whole, you really should have in mind cost per

acquisition as your central driving KPI.

#### Mark Pinkerton

And certainly in the work that we've done, CPA has been one of the

central metrics of KPIs that actually we've tried to help focus organisations

on as part of an overall move to being more customer-centric. Because if you

don't understand the actual cost of getting new customers, your whole focus in

terms of customers is going to be slightly flawed.

#### David Worby

I think that a lot of businesses are still not measuring CPA and it may be

true that it's difficult in fact Google doesn't provide you with a CPA number and therefore many people don't use it. They use what's default kind of out of the box, but we would

urge people through whatever measures you want to include or exclude, a

measure of the cost of acquiring a customer for a number of reasons. One, as

David said, we think it's the true measure of customer acquisition

performance, but also it starts to get your business to think about sales

through the lens of customers. You're not thinking about cost of sales, you're

thinking about cost of customers. Now of course customers bring you sales,

that's what they're kind of there for, but thinking about it through the lens

of cost per customer, cost per acquired customer, brings the narrative of

customers into your business, which we know is still quite deficient in many

businesses.

#### Mark Pinkerton

Yeah, so obviously that's the central measure that we're advising people to

focus on. But in terms of the customer acquisition funnel, how have you gone

about that in either the companies that you've been in or companies we've

advised in terms of actually tracking awareness and sentiment? I think that

covers the main measurement in terms of CPA, but in terms of understanding

where you would actually focus your time and efforts, how would you go about

that?

#### David Kohn

Well, let's assume you already have a digital marketing program in place.

You're going to have a whole heap of statistics on each of the channels that

you're running. And you're going to be able to look channel by channel, how

much traffic am I driving? How many conversions am I driving? How much revenue

am I getting? And how much am I spending? And as a start point, it's always

great to say, is my channel driving more traffic? Is it driving it more cost

efficiently? Is it driving the levels of growth that I expect or not?

Basically, that is your start point for determining where do I focus.

#### David Worby

And I think in a minute, we're going to go on to suggest how people use their

channels rather like a graphic equalizer to play and optimize as time goes on.

But we'll cover that in a few minutes, I think. Okay. There's also another

lens here that I'd like our listeners to kind of reflect upon. And it's now

co-joining what is often seen as a separate science, the science of segmenting

and defining customers as being a valuable tool for marketers to use. I call

this, are we fishing in the right ponds? And it's trying to define who your

target market and target customer is to work out whether your mix of channels

is broadly right. This is about trying to understand the intent of people at

different stages in either their week or their life. And try to ensure that

you are approaching them in the right kind of way, whether they're in a

browsing mode, whether they're in a transactional mode, whether they're in a

researching mode or something else. It's about trying to align your business

target audience with the channels that you've got. It's from then that we then

go on to optimize those channels. But for example, you may be a business for

whom you believe you've got customer types that would be relevant for

something like a TikTok channel. You may not be currently in a TikTok channel,

and you may be thinking that there is some correlation between your target

audience and that channel. We'll talk a bit more later about how you should go

about doing that. But at this point, I think you have to go back to the target

audience you're trying to attract and align that in very broad terms to your

marketing channels. That's it, David.

#### David Kohn

And another thing that I think is definitely worth considering is what level

of consideration do customers have when buying your product. Now I've come out

of furniture retailing. People don't on impulse think, oh, I'll buy a sofa or

I'll buy a dining table. They've probably got the idea first. I probably need

a new sofa because they've looked at their shabby one in their lounge. So

there's a lot of consideration. There's a lot of search associated with that,

whereas if you're in the gifting sector or maybe in the clothing and footwear

sector, the chances are your customers are far more likely to buy on impulse.

They're far more likely to browse. So for a business like Heals or Snow and

Rock, where I also worked, search was an incredibly big part of our customer

acquisition program.

Because you were more likely to find them, talking about fishing in the right

ponds, the pond they were fishing in was, I am looking for something specific.

Whereas if you're at the more clothing, the lower ticket end of things, you're

probably more likely to find them in social. So that's gonna be a greater

proportion of your customer acquisition effort. Okay.

#### Mark Pinkerton

And what should the approach be if you're looking to adopt a new channel of

marketing? We've mentioned TikTok a number of times, but there's always new

social media channels arriving that we haven't heard of as old folk. But TikTok has clearly got to mass market penetration very quickly.

#### David Worby

Yes, and there's a philosophy here which is simply not to bet the shop on

anything. I think the concept here that is right for most people is to be open

and iterative. Open to the notion that your customer target is likely to

affect all channels. The question is to what extent. But to be open to the

notion that you should try things and experiment rather than have some big

strategic plan to enter the TikTok market as an example we previously used. Be

open to the fact that some of your customers will be using TikTok, that's

probably not wrong and scalp out small amounts of trial budget, which one

should always have, as a way of working out whether for real that's the case

or not.

#### Mark Pinkerton

So, effectively adopting an agile marketing approach. Makes sense.

#### David Kohn

And that's as true for established channels as it is for new channels like

TikTok. If you're in PPC, if you're in Facebook, Instagram, there's always new

things and there's always new campaigns you could be running. You've got to

retain an openness to testing. But as David said, don't bet the house on it.

Yeah.

#### Mark Pinkerton

Yeah. Okay, so we've talked about the funnel and we've talked about

measurement, so then we get to the gnarly question of budget and budgeting. So

how do you actually manage your budget for customer acquisition?

#### David Worby

I think one of the things that we hear a lot about is have I got the

right budget which sometimes means why haven't I got more of course but how do

I know that I've got the right amount and I think I tend to take a very

practical perspective here. You've got what you've got

and that's where you are at the moment. The challenge is how do you determine

that you need more. How do you take what you've got, optimise it to the extent that

it's performing at its absolute maximum as a way of justifying you getting

more budget. Now we all know that the desirable place to be the nirvana of

this is seeing budget as a cost of sales but in reality we all know it's seen

as a discretionary thing that you are asked to fight for and are given at the

start of every financial year. So my approach to how you ensure you don't lose

it or get it hijacked for some other cause is to make sure it's performing at

its absolute best such that you can show anybody in your business that the

impact of more budget is to return x number of extra customers or and x number

of extra sales.

#### David Kohn

Yeah, as a digital marketeer, very few of you will think you've got too much

budget, but I'm guessing that many of you will have finance directors or CEOs

who think you've got too much budget. So the first thing I would say is make

sure you're on top of the numbers. Make sure you understand what each channel

is delivering for you in its own right and make sure that you understand what

every channel is dealing in its totality. The fact is, everybody in your

business, the naysayers, they've got to understand that traffic doesn't come

for nothing and if you have a traffic target, whether that target is to grow

by 100% or whether that target is simply to retain what you've got, it is

going to cost you money. So your first task is to make sure you know what your

spend is delivering for you channel by channel and its totality. You must be

on top of the numbers. You must understand what returns you're getting. You

must understand what traffic you're driving because otherwise you'll be

vulnerable. The next stage is to think, well, how can I get more budget? And

again, being on top of the numbers here is critical. Now it's very difficult

to know whether you're in a declining marginal return or whether your returns

will continue to increase in a straight line. So realistically, you can do two

things. One of which is you can test extensions, you can test increases and

see what happens. The other thing is you can model it and you can say, well,

what if the return I get is the same as the return I'm getting now? What if

the return I get is half of what I'm getting now? If as David said, you've

optimized what you've got and you know that what you're spending is producing

a positive return, is producing the sort of results that the business expects,

that gives you a much better platform from which to say, look, I really could

do with some more and I could do with it in these specific channels. Okay.

#### Mark Pinkerton

Okay, and in terms of the optimization of those channels and getting the

absolute very best out of them, is there anything that you can say to our

listeners to guide them on that process?

#### David Worby

Well, maybe one thing. I tend to have a visual in my mind when I think about

the optimization of channels, and it's the kind of old analogy of a graphic

equalizer, where you're playing with sliders and buttons and you're constantly

optimizing the performance of individual channels in the belief, which I have

to say is often true, that the consequence of that is that the bottom line,

the composite CPA you're working towards, will improve. So your channel

optimization is governed by the rules of that channel. The rules you'll apply

for one, for example, for social media, won't be the same as it will be for

direct marketing, or it won't be the same as for emails, but the reality is

optimizing those individual channels in a way that gives you the best

possible, or rather lowest possible, cost per acquisition is clearly in your

interest. So the point you get to that, what you will have is an ability to

convince your audience that an extra dollar spent with you is a profitable

dollar, because I'm sure that's the case. But don't think there's an easy

solution to this. You know, bigger businesses and those that have been doing

it for 30 years will have fleets of people and fleets of algorithms and fleets

of effort going into small individual optimizations that give you a net better

result. There is really no getting away from the fact that this is just hard

graft.

#### Mark Pinkerton

So, in terms of wrapping up this podcast conversation, what's the sort of one

piece of advice that you would give to our listeners? David.

#### David Kohn

For me, I'm not saying that PPC is dead by any stretch of the imagination, but

I do think it's become more and more difficult to drive growth through that

channel. And therefore, where you're gonna get much of your growth is in that

awareness and consideration area that we talked about. And that principally

means the social channels.

That's where you're gonna drive awareness of your brand, and that's where

you're gonna change your brand image. But it's not gonna be enough just to

identify your target audiences, find your target audiences. You're gonna have

to find ways of breaking through the incredible amount of noise that they're

gonna receive on a daily basis. And the only way you're gonna do that is with

strong creative content. Now in the past, creative content was a very top-down process. Your brand department would create an ad and you'd show that ad in whatever channels you could, whether it was a newspaper, a magazine, TV, et cetera. But now, you've not only got

multiple channels, but you've also got multiple segments within those

channels. So what's gonna be critical for you is number one is to create

compelling, interesting, breakthrough content. But also, you're gonna have to

customise it at the very least by channel, and potentially, you're gonna have

to customise it by channel, by customer segment, and potentially, you're gonna

even have to customise it by channel, by segment, by customer. Technology is

gonna be helpful. I think we're gonna see the use of AI make these things

materially easier. However, you're still gonna have to have great ideas and

you're still gonna have to think, what's gonna work for me, on what channel,

for which audience?

So David, what's your point?

#### David Worby

I think the point for me is linked to the content and execution challenges

David's just talked about. The technology is going to remove those

challenges, I think in a very short time frame. So in order for you to be able

to take advantage of that, you've really got to get your customer segmentation

sorted. The marketeers have put that on the back burner because they don't

have the execution capability. They're shortly gonna have that execution

capability as David has said. And therefore you need to get your segmentation

sorted now.

#### Mark Pinkerton

Yeah, that makes complete sense. And the thing I was going to say was that

you're now getting to a situation where the speed of creative churn is going

to be astronomically higher than it has been historically, particularly if

you're in this sort of very close to real-time personalization of channel

customization, you can't keep going with the same creative more than a few

days in that environment, so you're going to have to have many multiple

versions of things and you can't present that creative to people multiple

times in the way that historically people always used to do, you know, you

would run TV ads multiple times until you've got the recall rates up in the

old days. Now you get to a point where actually if it's not something new,

people switch off because the attention span now apparently is about 1.8

seconds on a video. Even a year and a half ago it was 3.1 seconds, now it's

1.8 seconds, so being able to cope with that creative churn driven by social

commerce, which is actually trying to shortcut the awareness sentiment process

as much as possible for new brands, much harder for existing brands, so it's

going to really change the dynamics of the world and AI is the way that that's

going to happen without a shadow of doubt. But what we're going to do is I

think we're going to have a session with Ben Muir from an agency called

Unsociable in our next podcast and we will cover more then. Thank you very

much for listening, join us again on the next on.