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Customer acquisition analytics

What is it?

Customer acquisition analytics seeks to establish how effective you are at acquiring new customers, including how effective you are at pinching customers from your competitors.

This type of analysis can help assess how successful acquisition has been in the past and also predict the future so you can ensure your sales and marketing initiatives are cost-effective and productive.

Why does it matter?

Customer acquisition analytics matters because if you don’t have enough customers your business will fail. If you are spending too much money acquiring those customers your business will fail. And if you don’t know how much you are spending then you can’t make changes to the process to ensure profitability as early as possible.

The key function of marketing is to let people know about your business, brand, products or services, but customer acquisition analytics looks at how successful you then are in turning that awareness into a sale and actually acquiring a customer. This type of analytics looks at the whole journey that a prospect goes through prior to the close of the sale, and works out if that process works as well as possible.

When do I use it?

You need to know where if anywhere your customer acquisition processes might fall down. For example, is it the marketing? Is it the product quality? Is it the delivery time? Is it the sales processes? Perhaps placing the order is too complicated or asks for too much information. As a result, you should conduct this type of analysis at least every year or whenever something changes in the acquisition process.

For example, you may use radio advertising very effectively and your customer acquisition costs may be quite low. However, if the radio advertising goes up in price or the effectiveness begins to drop you need to know about that as soon as possible, not six months after you’ve been losing money on radio advertising.

What business questions is it helping me to answer?

Customer acquisition analytics helps you answer business questions such as:

  • How successful is my marketing department at attracting new customers?
  • How successful are my sales department at converting initial interest or leads into a paying customer?
  • How much does it cost to generate those leads in the first place?
  • Are there any problems in the buying process that are putting prospective customers off making the final purchase?

How do I use it?

There are a number of metrics that can help to establish historic data on acquisition. For example, you can use the cost per lead (CPL) key performance indicator. As the name would suggest, cost per lead works out how much it costs to attract each potential customer to your product offering, and it is a powerful leading indicator of likely future revenue. The assumption is that if you can attract potential customers cost-effectively then sales in the future will be strong.

That said, not all leads are equal so to make this metric more accurate and indicative of future performance you need to calculate cost per qualified lead. A qualified lead is someone who is definitely in the market for what you are selling and is at least in principle ready to buy. Another useful metric to assess past results is the customer conversion rate (CCR). This metric looks at how successful you are at converting leads, qualified or otherwise, into paying customers.

If you acquire new customers online there is also a wealth of data that can then help you to analyse the entire customer journey. You can track what parts of the website they visit, what they read and visit, all the way up to the point of sale. This means that you know when a customer places a product in their shopping basket on your website but don’t buy and at what stage in the process they drop out. Customer acquisition analytics looks to uncover why. For example, if you discover that a high number of people reject the purchase because they have to first register and add loads of personal data then you could revise the registration process to only ask for the absolutely necessary information. This sort of insight is also possible in the offline world using camera and sensor data (Chapter 26), although it’s not so easy.

There is also a great deal of data around acquisition on review sites or social media. For example, if people are complaining about the time it takes for your business to deliver your products or complaining about the standard of the packaging when it did arrive, then these insights should be used to assess what’s going wrong and how you can quickly improve.

Practical example

Say you operate a car dealership for BMW. All the marketing for BMW will be done centrally. The purpose of that marketing is to raise awareness and drive potential local customers into your dealership. But do you know how successful you are at then converting that interest into sales?

You could install cameras at the dealership so that you know how many people visit the site. Using video analytics (Chapter 11) you identify how long each salesperson spends with each client and whether certain salespeople consistently outperform the rest. You could also track what people are saying about your dealership online to identify if there are any weaknesses in the acquisition process that can be solved.

Tips and traps

When calculating cost per lead and cost per qualified lead calculate them separately for each marketing initiative or campaign you execute. This will help you make better decisions and give you a much clearer picture of what is working and what is not. If you try to calculate cost per lead or cost per qualified lead across multiple initiatives then there are too many variables that could skew the result and you won’t get very meaningful data.

Further reading and references

To find out more about customer acquisition analytics see for example:

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