How Search Affects List Decisions
Every day, more multichannel marketers dedicate more budget dollars to search/affiliate programs. However, few take a holistic customer view when creating strategies to maximize these dollars or have a strong understanding of how to adjust their list strategies accordingly.
How can you develop more insightful strategies to maximize your investment in search/affiliate programs? The following offers insight on how better to scrutinize search/affiliate program performance and adjust tactics accordingly.
What we know today.
• It's new. Most marketers have only one or two years of experience with search and affiliate, so the long-term effect on customer files is still unfolding, along with what adjustments marketers need to make to their contact strategies.
• Many are finding that some search/affiliate orders come from existing customers, as much as 50 percent and higher. When marketers match search/affiliate orders back to their database, they can understand how many orders are from new customers. An accurate understanding is an important component to guiding marketing budgets and maintaining profit margins.
• Even with a low ratio of new to existing customers, search/affiliate programs can generate new customers at a low initial cost. Many marketers will see a positive contribution on the first order, and a positive contribution from an initial purchase makes shifting acquisition budget away from direct mail seem like a sound move. But wait!
• New search/affiliate customers show lower repeat buying rates and long-term value than those from direct mail. Marketers notice as much as half the repeat buying rate and a rise in the number of one-time buyers. In general, it costs less to keep customers than to find new ones. Therefore, it is important to find the right balance for your marketing budget.
• Search/affiliate names behave differently and require separate strategies. Many marketers mail their entire 12-month buyer file monthly regardless of potential. This new source of customers warrants a new approach. Also, differences exist in long-term value of customers acquired by different search words and various affiliate programs. Strategies need to drill down to the keyword and affiliate partner level. Keyword performance can vary by season, and so must strategy.
• Prospect model performance and universe may increase by removing non-direct-mail-driven search/affiliate names from list rental modeling. One benefit of renting compiled lists is the ability to select modeled prospects based on an existing buyer profile. Abacus has found that cloning the "best responder" can lead to a higher lifetime value for each acquired name. By removing pure search/affiliate responders from their lists, marketers may realize higher response rates and incremental prospect universes.
What can you do today? Three BIG ideas.
• Analyze your database to determine the long-term effect of marketing strategies beyond initial response. Carry indicators (such as original source, search word and affiliate partner) associated with each transaction to conduct the level of analysis described. And use more advanced match-back methods when allocating response to understand performance by list segment and to make better list decisions.
• When assessing the long-term effect of new strategies, maintain your direct mail prospecting dollars and find new budget for search/affiliate programs to ensure the growth of a healthy database with high repeat buying behavior.
• Determine the ideal contact strategy by customer segment based on long-term value potential. Test a "control not mailed" panel to determine the incremental lift of search/affiliate on orders from existing customers. Determine which method provides the highest return on investment. Leverage total spend in your competitive category to determine customer potential and create a contact strategy that reduces profit erosion on low-potential groups.
Remember, having a contact strategy is critical in maximizing this new advertising channel.