Last week, Google made a surprising announcement and opened up their Google Shopping platform to unpaid product listings. The move comes as many brick and mortar retailers were forced to close their doors (at least temporarily) due to the Coronavirus pandemic and may now be looking to more e-commerce opportunities.

So what does this shift mean for merchants? As part of our weekly webinar series where we highlight digital planning strategies to combat the Coronavirus pandemic, we interviewed VP of Strategic Accounts, Phil Strohl to better understand what this shift in Google’s offering means and how marketers can leverage this new opportunity.

Watch the quick 15 minute video above to uncover:

• What the Google Shopping opportunity means for existing Google Merchants and Merchants that have never used the platform.
• Where to get started if you’ve never used Google Shopping before and what to tackle first for the biggest advantage.
• Key recommendations to maximize the Google Shopping feature, such as: review & optimize product feeds and add products that may have been excluded previously due to a low Return on Ad Spend/margin.

  

At LQ Digital, we’ve captured a lot of data over the last 15 years on what scores as best-in-class digital performance (search, social, affiliate). At this time we want to contribute by sharing our data, knowledge and expertise to help your company survive this turbulent time and provide relief.

Still have questions or want a us to cover a particular topic? Email us at ehoffman@lqdigital.com and remember to subscribe to our webinar series so you always have the latest news and insight in your inbox: subscribe here.

It’s been almost a year since I last covered how it’s possible to ‘target’ without personalization on Facebook. Now I’d like to share what we’ve learned at LQ Digital when it comes to targeting in this new age of Facebook restrictions.

Background

Facebook adopted HEC restrictions on March 19^th following the civil rights lawsuit with the National Fair Housing Alliance (NFHA), Communications Workers of America (CWA), and several other organizations. As part of their settlement, Facebook agreed to make significant changes in how businesses target individuals. One significant change included creating a separate advertising portal for ads focused on housing, employment and credit cards – that limited the targeting options for these advertisers and instead, create a lookalike ‘lite’ tool called ‘Similar Audiences’. This is in addition to removing the ability for these advertisers to target audiences based on age, gender, and zipcode.

Now, certainly advertisers expected a bit more regulation after the Cambridge Analytics scandal – but at times, removing some of these targeting options can be challenging for our clients. For example, if you’re setting up an advertising campaign for mortgage lenders that want to target potential homebuyers – it wouldn’t make sense to target an 18 year old, they aren’t in the market to buy a home. They probably don’t even care to see the ad. Yet we can’t filter that out as directly as we’ve been able to in the past.

So how can we reach the needs of our clients and the end users with these new regulations?

How to Reach Customers Without Targeting

The feedback from Facebook is “target broadly and trust our algorithm” meaning they’ll identify the signals of potential buyers without your need to target them explicitly. The problem is, when testing this out budgets need to be sufficient to allow the algorithm to learn these signals. The math of this can be quite challenging especially if leads can be in the region of $250. Testing 2x Ad Sets based on Facebook’s 50 conversion in 7 days means you’d need to invest $25,000 to gain a statistical significant outcome.

For example, before HEC regulations, agencies could shortcut the Facebook algorithm learning through smart targeting options – but now we are facing more challenges by allowing the algorithm to find those signals by itself. It does figure that out quickly, but the industry as a whole saw a 15-20 percent drop across the platform. This is simply because agencies had to target more people for the algorithm to have enough data to do the learning. That hurts, especially when clients are looking at the ROI of their media dollar.

At LQ digital, we’ve done our own multi-variant tests. By adopting a strategic approach to segments and audiences through insightful research, we can expedite performance. Another strategy we took was to optimize for the highest possible conversion event with the most volume of signal – too small a data set can be detrimental to algorithmic learning in the platform. If a customer clicked on an ad and went to a website to fill out a form for a loan, what we as advertisers would do is put pixels on that website to show that person converted and then send the signal back into Facebook to determine variances between high-value customers. With that, we were able to mitigate risks for our clients and avoid the 20 percent downturn that many advertisers experienced.

As a preferred Facebook partner, we worked closely with Facebook to identify ways to improve performance in spite of these regulations. We’ve found that the Facebook algorithm works well and has improved considerably in the last 18 months. We’ve taken our findings and outlined 3 key pillars to optimize performance with these guidelines.

1. Optimize for Signal Based Targeting

I can’t stress this enough. You want to optimize toward the lowest conversion point you possibly can with the most volume, so the algorithm can find more of those customers. Of course, most clients want that – but the volume may not be enough to drive algorithmic learning. If you optimize too high in the level – that signal isn’t strong enough. You need the right mix between volume and signal.

2. Adopt an Aggressive Bidding Strategy

Adopt advanced bidding strategy in the auction. With a lot of HEC companies, like financial services, the content is less engaging. For example, you might be targeted with content by Nike or ecommerce brands everyday. Facebook doesn’t discriminate, they will show you both ads and advertisers win or lose by the ranking system Facebook implements. As you can imagine, buying shoes isn’t a big decision (for most!). The decision to cashout equity in a house, or take on a new loan is a more considered process. The less impulsive the lower the Estimated Action Rate (EAR) Facebook’s algorithm will attribute to your ad. Therefore, the conversion overall is going to be lower for those types of companies. If you’re already up against those ads since you’re competing against higher engaging brands, you have to win the auction. Your bidding strategy has to be aggressive enough so that your ads get shown enough against the other brands – that means switching from automated or lowest cost bidding and using a Cost or Bid Cap strategy, which can guarantee more consistent delivery of impressions.

3. The Art of Beautiful

According to Nielson, 56 percent of all performance in social is attributed to creative. Financial Services brands are conservative in comparison to a majority of other advertisers, therefore creating compelling and engaging assets for personal loans isn’t common. That doesn’t mean you should ignore the power that imagery and video can have. At LQ Digital, we developed a framework and set of principles called the ‘Art of Beautiful’. An example would be the overuse of stock photography, which by definition is already fatigued. We seek creative that aligns to core photography principles ie. The Rule of Thirds or The Golden Ratio and is visually compelling so it has an interesting impact on the newsfeed.

By putting these 3 pillars together – signal based targeting, bidding strategy and creative, we saw performance rebound back to the levels that they were before the HEC regulations – and we’ve become better advertisers as a result.

Questions? Contact us, we’re happy to help.

Make sure you bring the right sling

By Patrick Wang, Chief Digital Economist, LQ Digital

It seems like every day you hear of a new Fintech startup entering the market with a better mousetrap.  New technologies from Google and Facebook have allowed disruptors to reach customers directly, blockchain has created new ways to underwrite contracts, and emerging mobile and data techniques are changing the way companies can deliver financial services quickly and at lower cost to the consumer.   Like the David, their ability to strike where it matters have allowed them to exploit chinks in the armor of large traditional financial services companies.

Despite the interest and hubris of all Fintech disruptors however, Fintech companies would be wise to respect that Finserv incumbents are still Goliath’s in the space and for good reason.  Challenging them in the wrong way will lead to certain defeat as they can be crushed by their sheer mass and resources.  Banks and other financial institutions have spent the better part of a century consolidating and monetizing the value of each customer they capture.  They can afford to take a loss on an initial transaction so that they can ultimately cross-sell customers into other services.

Take for example:  JP Morgan Chase.  After 100+ years rolling up Finserv offerings – they can afford to acquire checking and savings customers at a loss – by creating an engagement vehicle to market a full line of financial services from mortgages, home equity, unsecured loans etc, and vice versa for other product lines.

In contrast, a Fintech disruptor like LendingClub started out tackling personal loans with a best of breed solution – offering quicker funding, better rates, and ease of service based on novel capital sources and new lending risk models.  An attractive value proposition on its own, but is it enough to build a competitive business in a room filled with giants?

What’s the Problem?

The challenge for all Fintech disruptors trying to grow profitably is this:

They must be surgically precise about the profile of financial customers they are looking to acquire because:

• Large incumbent banks have had the luxury of being less precise with their customer acquisition strategy because they offer a full line of services (they can bring everyone in and offer something of value)
• Copying a large bank’s broad go-to-market will lead to Fintech disruptors depleting their limited growth budgets, while quickly finding out that they can’t service many of those customers profitably.

Making a hard problem harder is U.S. financial marketing compliance.

• U.S. Fair Lending regulations restrict targeting consumers by many of the dimensions that can signal customer value to a Fintech disruptor.  With this constraint, many Fintech companies are quickly forced down a path where they find themselves in a crowded acquisition market with not one, but two or three large incumbents with little room to maneuver.

Fintech disruptors have much less room for error when it comes to acquiring customers.

• Large banks have large balance sheet and an already established portfolio of customers to lean on, so they are insulated from customer acquisition investments gone bad.  A fintech disruptor has less margin for error as a bad bet can submarine their growth.

The margin for error continues to erode.

• Cost per clicks (CPC) continue to rise year over year as the competition for growth continues to increase with both traditional finserv and fintech companies going after the same fixed pools of interest.

Bringing a Sling to the Customer Acquisition Melee

What does success require a Fintech disruptor to stand a chance and not get crushed by exorbitant CPC’s, locked up lead marketplaces, and loss-making acquisition?

1. Having a clear sense of the specific customer profile where they have an unfair advantage of converting customers.
2. Knowledge of both new and old pathways to financial customers and who the customer brokers are in those spaces. Knowledge of these go-to-market channels allows Fintech companies to comply with regulation and at the same time target and segment their customer acquisition.
3. A detailed and precise instrumentation of their sales cycle tied to the marketing channels that drive acquisition so that they have confidence in the acquisition investments they are making in advance of revenue.

Why Partner and Why Now?

• Diversity of Skills – Few individuals and organizations have the diversity of skills needed to be a successful all-in-one team (e.g. data science, media buying, conversion design and tech, messaging, etc.).  It’s a multi-disciplined approach that requires skills from scrappy startups and knowledge of the “old world”.

• Data Capture / Benchmarking – Success requires capturing as much data as quickly as possible and then comparing those to 3^rd-party benchmarks on channel performance.  With access to this data, Fintech disruptors can quickly assess – is it our offering?  Or is it the customer?  Having a partner that’s worked with many other Finserv companies allows you a unique perspective on “what’s to be expected in the space”.

• Measuring Segment Unit Economics (performance from marketing KPIs down to LTV) – Calculating the potential likely future revenue / profit from each lead source or type is critical to helping you direct today’s media spend towards the channels and conversion strategies that will deliver the most revenue and profit, at the lowest marketing cost.   Expertise in knowing how to implement accurate data tracking from marketing platforms to your CRM, and then analyzing that data, can be a difficult to find internally in fast-growing startups.

• Time to Market – Once a fintech disruptor’s offering is in market, the clock is ticking.  Competitors have a chance to observe and replicate many of the valuable aspects of their offer.  Having established relationships with publishers and lead brokers allow companies to accelerate their growth and not stumble over many of the common pitfalls in the industry.

Why LQ?

In short – we have all of the ingredients for Finserv acquisition success.

• For LendingClub we managed media against a cost per issued loan.  (So we built data precision on how media turns into revenue, and built markers earlier/higher up in the funnel that signaled which leads were more likely to turn into revenue).
• For one of the largest multi-national financial services institutions, we helped them optimize their Direct to Consumer mortgage channel, accelerating their time-to-market by 1) short-listing the lead partners to work with, 2) rapidly stand up those relationships, and 3) optimizing each relationship against a cost per funded loan performance metric leveraging performance data captured through a lead conversion process we managed.
• For SmartBizLoans, we are able to target the specific profile of small business owners who can both credit and revenue qualify for their loans.  (So we know precisely how to target serviceable customers).

Not only has LQ worked with a large portfolio of Finserv organizations (traditional and disruptive) for media buying and customer acquisition, but we also deeply understand the sales cycle.  We put our own employees on the frontline calling prospects and we learn very quickly what motivates a Finserv customer to take action, qualifying and transferring over 250,000 leads / month.

Ready to learn more? Contact us today or download this white paper to learn about what it takes to become a Digital Economist.

Are you prepared to answer the 3 questions your CFO will likely ask you?

If you’ve been following along with our Digital Economist blog series, you will have learned a lot about the ins and outs of building a successful digital customer acquisition strategy for your business. Here’s a refresher of the basics.)

From building customer segments, made up of only your most profitable customers to developing persuasive value propositions to architecting segment-specific conversion journeys that drive action — it should be clear by now that digital customer acquisition isn’t something that just comes into fruition overnight. It requires testing, measuring, and constant refining. As market dynamics continue to ebb and flow, so will your digital customer acquisition strategy.

Remember, though, that at the end of the day, the entire purpose of digital customer acquisition is to grow your business. And while everything we’ve discussed thus far is important, how you — and your CFO— will ultimately measure success will come down to the revenue and profit generated by your digital customer acquisition program. In fact, a whopping 94 percent of CFOs have said they would increase digital marketing budgets if there were clear evidence it led to sales. This is proof that approaching digital marketing as a Digital Economist has its perks.

So, to wrap up this first wave of the Digital Economist blog series, we’re going to take a quick look at the important role that unit economics plays in assessing the overall economic impact your acquisition efforts can have on your business.

The goal of any digital customer acquisition program is to devise a plan that will pay off once you’re able to get only your most profitable customers into the top of the funnel. You might even ask yourself, “For every dollar I invest, what am I going to get out of that dollar invested?” Putting unit economics into action will help answer this question. It will uncover exactly what tactics you’ve deployed are working to generate the highest return on investment (across both channels and customer segments), what’s directly affecting CAC (customer acquisition cost), why LTV (lifetime value) might be greater for certain customer segments and channels than others, and, most importantly, how you will ultimately invest your next customer acquisition dollar. Measuring economic outcomes in this way will allow you to test all the work you’ve already done around customer segmentation, value propositions, and conversion journeys.

Here’s why this matters: your CFO will want to know that the budget you’ve allocated to digital customer acquisition is actually working. So, to help you shine in those conversations, let’s take a look at the three questions you’ll most likely be asked — and how you can come to the table prepared to tackle them with confidence.

1. When are you going to spend money?

If you’ve been through any budgeting cycle, you know that money doesn’t just appear out of thin air. The dollars you get for your digital customer acquisition efforts won’t either. For starters, your CFO will ultimately want to know exactly when you plan to spend the money allocated in order to determine when and where to make strategic trade-offs between different investments across the company.   

This is where unit economics comes in handy. As marketers, we’re accustomed to reporting the success of our campaigns via vanity metrics like impressions and CTR. However, to help forecast budgets for the future, you’ll need to provide your CFO with line of sight into the sales and revenue pipeline, clearly articulating what value — and profit — can be achieved by continuing to dedicate budget to your digital customer acquisition efforts. Identifying both past and future success via CAC and LTV (which we’ll dive into more detail below) allows you to speak in terms your CFO understands. He or she will want to know — and have quantifiable proof — that your tactics are driving profitable growth. That’s really the key to locking in future budget.   

2. Will you make more than you spend?

No CFO will ever expect the fruits of your labor to be in the black immediately. However, at some point, you will need to prove that your digital acquisition plan will eventually make you more money than you spend. To do this, your unit economics need to be buttoned up on two fronts: 1) spend per customer (CAC) and 2) revenue per customer (LTV).

For example, one of our clients is a health-conscious meal kit delivery subscription service. Over the last couple of years, this vertical has become increasingly popular — and with that popularity has come increased competition. This has driven up CAC considerably. To optimize for these highly competitive market dynamics, our strategy out the gate was to keep CAC low in order to learn the LTV of those customers. And based on the cost of a weekly subscription, we knew that newly acquired customers would need to subscribe for at several weeks to break even on that target CAC. Understanding this “break even” delta helped inform the client’s messaging and offer strategy and allowed us to identify, build, and execute campaigns that brought in customers most likely to subscribe for a longer period of time. This gave us the data we needed to fully understand their LTV.

While CAC calculations are great for understanding unit economics at the short-term individual customer level, oftentimes your CFO will also want you to paint a clear picture around what profitability could look like in the long-term. This is especially important knowing that a handful of customers will inevitably churn out over time. This is where calculating LTV comes in handy. Depending on the nature of your business, there are a couple primary ways to go about this:

• Perpetuity Model: This is best suited for businesses with a subscription model (as in the example noted above) where revenue per customer is more or less constant per month. The premise is that a certain percentage of customers will stay while another percentage will unfortunately leave. LTV in this instance is simply “monthly revenue” divided by “monthly churn.” Although this model can help estimate LTV on a forever-basis, it’s a great way to assess what LTV (cumulative revenue) for a set of customers could look like in shorter time frames (12-24 months) as well.
• Cohort Model: This is best suited for businesses where the amounts and timing of transactions are variable (think: e-tail). These businesses will typically use digital marketing tactics, like email, to promote discounts or other offers that incentivize customers to come back for more. The goal here is to understand, from among an average of all those new and repeat customers, what LTV might look like. However, as opposed to the purely future-looking perpetuity model, you need at least 8-12 months of customer purchase data to make an accurate prediction here. To run this calculation, group customers at the start of the any given day or month and then count cumulative transactions for that group of customers over time. Do this for multiple start times — and then layer that data on top of each other to create a curve that shows how, on average, revenue could grow and eventually plateau over time.

Another client of ours works in the insurance, loan, and mortgage business. At one point, we were asked to help them forecast the long-term value of all mortgage leads generated on a monthly basis. Why? Because mortgage leads take an average of 45 days before they actually become revenue for a bank. So, given this long lead-to-purchase lead time, our client wanted to know when they could feasibly expect to make a profit on their marketing efforts. The cohort model proved to be a good solution for addressing this question. By grouping all past customer acquisition efforts by month over the course of 12+ month period of time — and then identifying all future revenue attributed to it on a month-by-month basis — we were able to spot a clear trend that helped us predict, with confidence, how much our client should spend moving forward (per month) in order to achieve their specified growth goals, all without overloading their team.

3. When will you get make that money back?

Finally, in an effort to manage cash flow and, more importantly, temper investor expectations, your CFO will likely want to know when your digital customer acquisition efforts will finally turn a profit. This is where all the LTV measurements from above will become a true game changer.

With standard quarterly (or monthly) financial reporting, costs and revenues are reported purely on an accrual basis. The problem here is that by only looking at revenues vs. spend in-quarter, for example, you fail to paint the entire LTV picture. Within a given quarter, your CAC spend may have outpaced revenues, which can be extrapolated in this very narrow time frame as contributing to a loss in profits. Looking at the bigger picture, however, might tell you a different story: that cumulative revenue actually surpasses CAC spend over time. Therefore, you’ve successfully managed to turn a profit on your digital customer acquisition efforts (just not necessarily if you look at the numbers within the confines of a single quarter).

Here’s why this distinction is so important. By boiling your digital customer acquisition efforts down to unit economics around LTV, you can add value to traditional financial reporting that helps business leaders make a direct connection between performance marketing to future business growth and profitability in an entirely new light — and earning you a seat at the proverbial revenue table.

Are you ready to become a Digital Economist?

This now officially brings a close to the first wave of our Digital Economist blog series. Throughout the series, we’ve given you an in-depth look at the four key pillars of a successful digital customer acquisition program to help you understand the importance of approaching digital marketing through the lens of a Digital Economist. Now, it’s your turn to put everything you’ve learned into action. Are you up for the challenge?

To learn more, be sure to download our whitepaper, “The Rise of the Digital Economist.”

Follow these steps to convert customers to action like never before

We’ve covered a lot of ground since beginning the Digital Economist blog series. Here’s a quick recap of what we’ve discussed thus far. In part one, we provided a bird’s eye view of the four key pillars of a strong digital customer acquisition strategy. In part two, we ran through the building blocks of customer segmentation — underscoring the importance of knowing exactly who your most profitable customers are. And in part three, we explained how creating value propositions tailored precisely to your customer segments can serve as your most powerful tools for persuasion. All of that helped set the stage for what we’re about to do now: creating conversion journeys that inspire your most profitable customers to take meaningful action — the kind that will grow your business over time.

Now that you know who your most profitable customers are and how you can motivate them to act, it’s time to architect a clear path that leads towards a purchase decision. This part of the process is important because as markets become increasingly saturated and competitive, digital acquisition costs ultimately rise. Optimizing how you convert your most profitable customers to take real and meaningful action is really the best way to keep costs down in the long-term.

Here’s the challenge: there’s almost an unlimited number of journeys a customer can take to arrive at a specific endpoint. There’s equally an unlimited number of ways they can slip up, get distracted, or even get lost along the way. It’s up to you to create the path of least resistance. However, doing that requires optimizing your conversion journeys with precision. This is by no means a one-size-fits-all exercise. You need to optimize conversion for each of your customer segments and then track and measure performance by segment and by channel to more clearly understand LTV (lifetime value) and CAC (customer acquisition cost) at an individual level.

Unfortunately, this is the hard part. Will you get it right on the first try? Maybe not. Good news for you, though, we’ve developed a three-step plan to help you get there. Let’s dive in.

Step 1: Question

As a starting point, you need to come up with a way to spark initial action (aka, getting potential customers to convert). Part of this involves thinking about what could potentially act as roadblocks in that process as well. To do this, you need to build a case:

1. Drive Value and Action: Start by helping customers understand what they stand to gain by purchasing your product and service. Identify the need at hand (“problem statement”), then show how the product or service being offered will specifically address that need (“value proposition”). Then, follow it up quickly with a clear action step that allows them to take advantage of the offer (“call-to-action”).
2. Make People Believe: Just because you say your products and services can address a specific need doesn’t necessarily mean that alone will convince potential customers to act. You need to backup your promise with proof points —the same proof points you came up with when you created your value propositions. These are the bits of persuasion that will get customers to believe that what you’re saying is verifiably true.
3. Minimize Pain: If you still haven’t gotten a customer across the finish line, here’s your opportunity to make a hard (and more emotional) sell. Make the upside of taking action abundantly clear. Depending on the product or service you offer, appeal to people’s sense of patience (or lack thereof) and need for instant gratification, unwillingness to change, or general aversion to risk. Do they think that it’ll take too long to see results? Is there a potential loss of time or money involved? Help assuage their fears and apprehensions head on, and you’ll give them one less reasons to avoid taking action.

Step 2: Hypothesize

Now that you’ve crafted a bullet-proof sales pitch, you need to understand what exactly is stopping potential customers from taking action. As with all parts of the digital customer acquisition process, this involves a bit of trial and error. In other words, hypothesize and test your assumptions. Here are some easy ways to go about it:

• Put yourself in your customer’s shoes. If you were your target customer, would the pitch work on you? Is it convincing? You need to ask yourself both why and why not. This is a quick way to gut check. If your pitch doesn’t persuade you to act, what would make the situation different for a potential customer? (Hint: Nothing!)
• Ask for feedback. Why make assumptions — regardless of how educated those guesses are — when you can solicit feedback directly from customers? Customer support chat on your website are actually a great way to get indirect feedback. Customers will usually start up a chat because they have an issue or concern to deal with. If you pay close attention to what happens during those conversations, you’ll likely uncover specific pain points or confusion around value propositions. This just requires you to do a little digging after each customer conversation. Now, if you want direct feedback, it’s simple enough to send customers online surveys on specific points. This basically turns your customer base into a living, breathing focus group.
• Measure what’s actually happening. The great thing about this digital world we live in is that we can essentially track every action along a customer’s journey in near granular detail. Make sure your web analytics tools are set up so that you can see and track where people are engaging the most and dropping off along the journey you’ve created. While you’re at it, be sure to take a close look at what you’re asking customers to do at each step of the way and what conversion is happening. This can shed light into what customers need to believe in order to take action at each of those steps. You’ve got the data, so make good use of it.

Step 3: Test and Learn

We wouldn’t be proper Digital Economists if we didn’t continuously test and measures our assumptions to refine our digital customer acquisition efforts at every step of the way. Building conversion journeys is no exception to this rule. So, based on the hypotheses you reach above — regardless of how you get there – you need to create, test, measure, and learn from a real-life digital scenarios. The easiest way to do this is by mocking up a user experience (UX) flow, identifying the points where it’s essential to communicate a clear value proposition and adding in the right call-to-action steps or qualifying opt-ins. Once you’ve laid out the flow, convert it to a branded user interface (UI) that you can code into a landing page. Then use your web analytics tools to help you measure the effectiveness of those test flows. And then start all over again with new hypotheses. The more you test, the more you’ll know. And the more you know about what works and what doesn’t, the more effective your conversion journeys will be.

What are you waiting for?

As you can see, creating effective conversion journeys requires a bit of trial and error. You won’t necessarily get it right the first time, but with patience and the right amount of testing and measuring, you will be able to turn your digital marketing efforts into a conversion machine.  

Want to learn more about how we help clients with their conversion journeys? Check out the NewHomeGuide.com case study and read more about how we helped them achieve 124% conversion rate improvement YoY.

Your value proposition is your ticket to creating a connection with potential customers

In part one of our Digital Economist blog series, we laid out a four-step game plan for building and executing on digital customer acquisition strategies that ultimately drive revenue and profitability. Now, it’s time to move onto the second step of the process and learn about the ins and outs of creating a value proposition that persuades people to buy from your business.

Creating a strong value proposition is just as much about telling a story as it is about making a convincing argument. As a starting point, you have to equip people with all the reasons why your products and services are better than the competition’s. But then you need to go one step further by creating a sense of urgency that incentivizes people to buy what you offer in real-time while equally giving them a good reason to be loyal to your brand for the long-term.

We recently discussed the building blocks of customer segmentation. The big takeaway there was that you must intimately know who your most profitable customers are in order to target, reach, engage, and eventually convert them into actual (and paying) customers. A byproduct of knowing, testing, and constantly redefining who your most profitable customers are is being able to articulate a clear and concise message that will resonate with each customer segment to maximize conversion. This is where building a persuasive value proposition comes into play.

You might be thinking to yourself that this is a bit of a no-brainer. The truth is, it should be; however, more often than you might expect, brands will pepper potential customers with a litany of facts and figures, only to fail at creating a real and meaningful connection with them.  So, let’s get back to basics and review the core components of a great value proposition, so you can avoid falling into this trap:

1. Core Values: You may know what your brand stands for better than anyone else. But how well do you know what your target customers value most? In the game of digital customer acquisition, you have to put yourself in your customers’ shoes. What do they care about? What do they need (from your brand)? What motivates their daily habits – and beyond? Creating a value proposition that resonates with your target customers means speaking in their language — and showing them that they are your top priority. By tapping into the core values of your most profitable customers, you can carve out a message — through your value proposition and other associated communications — that is both unique to your brand and to your customers wants, needs, and expectations, providing more of an emotional “hook” for them to latch onto. This is why you must pinpoint your customer segments first. Without knowing who your most profitable customers are, how can you tap into their core values? (Hint: you can’t!)
2. Differentiation: Every brand wants to stand out from the competition. By rooting your value proposition in your customers’ core values, you automatically achieve this. However, there’s always room to go one step further. Think about who your nearest competitors are. This can include: direct competitors (businesses with the same offering and business model), indirect competitors (businesses with a similar offering and core values but a different business model), and disruptive competitors (businesses with a similar offering but unique core values that solves a customer problem in an entirely new way).  Think about how they all communicate externally, closely examining what they do well — and also where they fall short (as that could be an opportunity for your brand). Then take a step back and think about your brand from their perspective. What do you do well? What do you do differently? Understanding what makes your brand unique – in the context of your competition – is an added layer that can bring your core values to life in a way that only your brand can truly own.
3. Proof Points: These are what persuade potential customers to believe in your core values and clearly see how your brand stacks up to the competition. These can come in the form of stats, product features, customer reviews and testimonials, and other claims that aim to push customers more quickly down the funnel, from consideration to purchase. The reality is, as wonderful of a story as the combination of your core values and your points of differentiation are, no one is going to believe what you say without a little proof to back it up.

As you go through this process, there are a few things to keep in mind. First, you have to stay laser-focused on who your most profitable customers are and what they care about. This will make it easier to create value propositions that directly address their wants, needs, and expectations — especially in the time and place where they see your marketing message. That’s why you can’t simply create a value proposition in a vacuum; you must tailor your value propositions — yes, plural — to each of your customer segments. Being thoughtful about how you map your messages to specific customer segments will ultimately increase your chances of getting potential customers to a take a desired action. And second, it’s important to remember that creating a value proposition isn’t a “one and done” process. Customer needs will change. Your competitor will launch a new offer. The possibilities for change are endless. That’s why you must constantly revisit your value propositions to make sure they still hold up to ever-changing market dynamics.

Depending on the purchase decision being made or the product or service being offered, brands can choose to pull a couple different levers of decision-making: rational or emotional. Developing a value proposition is a highly rational exercise; after all, your focus here is to create messages and proof points based in rational facts about why your products and services are the best fit for your target customers.

But simply spouting out a long list of facts isn’t all that persuasive. And that’s because, in spite of how rational we all like to think we are, humans by their very nature oftentimes make decisions based on emotional factors as well. In fact, persuasion itself is about creating a connection — or in this case, a reason to believe. So, knowing that creating your value proposition is equally an exercise in communicating rational factors in a persuasive way, your goal must be, above everything else, to tell a story around those facts, creating an emotional connection with your customers that helps them see and feel why your products and services will benefit their lives in more ways than the competition can.

The Principles of Persuasion

Perfect segue! It should be clear by now that creating a value proposition is really all about persuasion at its very core. The story that builds around that value proposition has the power to not only create a meaningful connection between your brand and potential customers but also can inspire more immediate action and long-term loyalty. You may have heard about the six principles of persuasion. These are the motivators that have been shown time and time again to drive action. Here’s a quick overview through the lens of digital customer acquisition:

1. Reciprocity: You incentivize customers to take a specific action by promising to give them something in return — whether a promotional discount, a two-for-one offer, or something that makes them feel as though they’re getting a good deal. It’s basically an upfront way of thanking prospects for taking a chance on your business.
2. Scarcity: This comes down to supply and demand. The less of something you have to offer — i.e. the potential for a product to sell out or a promotional offer to expire — gives you the opportunity to persuade with a message of urgency. It’s basically the notion of “first come, first served.” (And it works because people love a good deal!)
3. Authority: You can talk about how great your products and services are until you turn blue in the face. However, that’ll only get you so far. By inviting outside sources who are considered (or can be viewed as) experts in your industry to give your brand a thumbs up, you’re able to build more (perceived) credibility around your message.
4. Consistency: Past behaviors can help predict future behaviors. For example, you may launch an email campaign around a new promotion to re-inspire engagement among your customer database. Based on how those customers responded to past email campaigns with similar offers, you can almost guarantee similar or greater results this time around — because once you’ve been successful at driving a specific behavior, it becomes much easier to drive that same behavior once again.
5. Liking: This is about creating that personal connection with potential customers. People, generally speaking, tend to gravitate towards brands that speak like them, that act like them, and that resonates with them. When you build a value proposition through the lens of your customer segments, you can achieve this.
6. Consensus: People are easily persuaded by others, especially in large numbers. In other words, the concept of “when it doubt, follow the pack” rings true for many when making big purchase decisions. After all, if the vast majority of people surveyed love a specific product or service, why wouldn’t you as well? This can be a great way to give your message the added support it needs to push customers across the finish line.

So, why mention any of this at all? Because creating a strong value proposition — one that’s unique to your brand and relevant to your most profitable customers — is an exercise in persuasion. As Digital Economists, LQ helps you bring your value proposition to life through digital advertising campaigns that apply the six principles of persuasion. We also refine and test those value propositions regularly to see what drives the highest conversion of your most profitable customer segments over time. Marrying the two is your recipe for success.

Why knowing exactly who your most valuable customers are — and how you can actually reach them — is the key to success for any digital acquisition strategy

In part one of our Digital Economist blog series, we laid out a four-step game plan for building and executing on digital customer acquisition strategies that, as a first priority, drive revenue and profitability. Now, it’s time to take a deeper dive into each of those steps, starting with the basics of customer segmentation.

Simply put, the purpose of customer segmentation is to understand who your most profitable customers are and identify a means for targeting and reaching them. Without a clear definition of your customer segments, you could inadvertently go down the wrong path as you begin to shape your value proposition, optimize your conversion journeys, and measure the success of your digital customer acquisition efforts.

Unlike in digital marketing, where reaching anyone who generally fits the “persona” of your target customer can be considered a win, as a Digital Economist the primary focus of customer segmentation is to create a distinct strategy for weeding out the “good” customers from the “bad.” In other words, you must build a strategy that allows you to differentiate, isolate, and then hone in on only those customers who have the greatest likelihood of becoming your most profitable customers over time. And it’s this focus on profitability that tends to get overlooked via more traditional approaches to customer segmentation.

But this exercise shouldn’t be done within the confines of your marketing team. Why? Because it’s a process by which you not only identify the specific traits associated with your most profitable customers but also determine the specific channels through which you can target, reach, engage, and convert those customers with precision (and success). To do this, you need to look beyond marketing alone and collaborate with both your finance and sales teams. You want to look at the revenue and transaction data directly related to past marketing campaigns. Looking at the data in this way (i.e. from multiple angles and data sources) provides you with quantifiable proof as to exactly which customer segments will have the highest potential for generating lifetime value (LTV) for your business in the future.

Based on our experience, we’ve developed what we like to call the three primary building blocks of a successful customer segmentation strategy:

1. Determining the profitability signals associated with customers that you would ultimately deem a “best fit” for your business.
2. Building customer segments that bring those profitability signals to life in personalized, business-relevant, and real-world ways.
3. Identifying specific audiences on digital media that mirror your customer segments, providing you with a platform for continually testing and targeting those segments with relevant marketing messages, all in an effort to drive conversion and generate greater lifetime value (LTV).

This all sounds simple, right? Let’s take a closer look at how these work hand-in-hand.

Profitability Signals

Before launching any customer acquisition program — digital or otherwise — you need to be obsessively clear about what makes certain customers attractive to your business (vs. those that aren’t). These are what we call profitability signals, which typically fall into two primary categories: business attributes and customer attributes.

Think of business attributes as “prerequisites.” They help you define specific parameters around the traits associated with your most profitable customers and allow you to weed out the customers who simply don’t fit the bill, immediately. Traits like “has a desktop computer,” “values privacy,” or “has sensitive information to protect” are good examples of this. Customer attributes, on the other hand, are demographic traits like age, location, and annual income.

Combining behavioral-driven business attributes with demographic-driven customer attributes allows you to paint a clearer picture around who your most profitable customers really are.

This may seem like an obvious or straightforward first step, but it’s not simply an exercise in identifying a series of desirable attributes. You’ve got to drill down deeper than that. The goal here is to create a precise customer profile that, from a purely economic point of view, will tell you which customers will buy more and buy more consistently over time. The clearer and more defined your profitability signals are, the more relevant your customer segments will be to your business. This is the key to optimizing your LTV/CAC (customer acquisition cost) ratio over time.

Customer Segments

Now it’s time to synthesize all those profitability signals into something that you can really latch onto. This is where developing customer segments come into play.

Customer segments are basically a distillation of profitability signals into “personas” that can be sliced and diced in multiple ways — or, more simply, groups of customers having common profitability signals. For example, further developing the example above, you might come up with following customer segment: “self-made small business owners in ‘Main Street’ America.” Also, depending on the nature of your business, you’ll end up with three or four core customer segments that can give your profitability signals a more actionable dimension.

The purpose of building customer segments is to give the traits associated with your most profitable customers real-life “identities” that can be targeted with precision. This also helps transform profitability signals into something marketers can actually wrap their heads around.

Audiences

Creating customer segments is merely a way to personify your most profitable customers. Unfortunately, you can’t just plug in “self-made small business owners” into Google Adwords — as convenient as that would be — and then wait for your customers to pour in. You need to go one step further. In the world of digital customer acquisition, you have a plethora of digital media channels to choose from for targeting and reaching your most profitable customers. As you evaluate those channels, you need to stay laser-focused on only those channels where audiences (i.e. real, living, and breathing humans) exist that mirror your customer segments. Using the example above, the best way to reach “self-made small business owners” might be to hone in on the following audiences that live within these channels:

• Email: Reaching small business owners through bank and lender databases
• Programmatic: Bidding on display media targeted to local business news content
• Broadcast: Buying spots to play during business-related talk radio and podcasts

Once you’ve pinpointed your audiences across various digital media channels, the next step is to build marketing campaigns that encourage potential customers to take some sort of action.

This notion of “context is king” couldn’t be any truer in the game of customer segmentation. Your marketing message must be relevant within the digital media context it lives in order to get potential customers to follow through with a conversion-based action. Fortunately, with digital marketing, you have limitless opportunities to refine and optimize campaigns — from the creative itself to the calls-to-action — to generate the highest conversion rates possible. That’s why you must be clear about who your most profitable customers are, as this will ultimately determine how you end up marketing to them.

5 Foolproof Steps for Customer Segmentation

Now that you know the primary building blocks of any customer segmentation strategy, it’s your turn to apply these concepts to your own business. There are a few ways to approach this. For example, if you intimately know who your ideal customers are inside and out, build from there. However, for businesses that have never created a true customer segmentation strategy of their own, the best place to start is by looking at your customer data. Since this tends to be the case for the majority of businesses we work with, for the purposes of this blog post, let’s start our five-step customer segmentation journey there:

1. Get the data. Identify what data sources you have within easy reach first. Whether it’s Google Analytics or a combination of sources — for example, those tied to your marketing campaigns — be sure to get a lay of the land. Second, don’t forget to bring your CRM (sales) data into the mix, so you can more clearly connect the dots between marketing KPIs and sales.
2. Identify what performance means to you. For most businesses, the conversion step of a customer making a purchase will be your key success metric. However, from the minute a customer engages with your brand through any digital media channel, you must be able to track exactly where customers drop off or when they decide to take a specific (conversion-based) action. Understanding conversion (or the lack thereof) from all of these angles will give you a more solid understanding of what performance looks like at every touch point along the customer journey.
3. Slice and dice the data. Start by segmenting the data across age and gender, as those are typically the most readily available variables on any analytics platform, and then layer on the relative conversion rates for each of the subsets you’ve isolated. The goal here is to create a simple and clear picture of performance at more granular level.
4. Segment with data-driven insights. Start by asking yourself two questions: 1) What customers do you have the most of and 2) Who are your best customers (i.e. who are your customers with the highest conversion rates)? This is essentially an assessment of overall audience size vs. relative conversion rate (for each age/gender data subset). As a starting point, you’ll want to focus on the largest audience with the highest conversion rate — and then fill in gaps from there. The goal here is to evaluate how well your website and marketing campaigns are working as well as why they are encouraging specific actions. It’s important to note that context also matters as you evaluate this data. Why might certain age groups index higher for your business than others? Are there other offline ways that customers can engage with your business — and how might that skew the data around certain conversion actions? Why might one gender drive more volume but fewer conversions? You need to answer these questions (and more) through the lens of your business to weed out only the customers who will likely generate the greatest long-term profitability for your business.
5. Begin targeting. Once you’ve determined the segments with the greatest potential to grow your business, it’s now time to identify the digital media channels through which you can reach them with targeted and relevant marketing messages. Then, it’s just a matter of optimizing those campaigns in real-time to ensure you achieve an optimal customer acquisition cost that maximizes your margins and total profit.

Why Customer Segmentation Matters

Knowing exactly who your most profitable customers are is the first and most important step in building a digital acquisition game plan that drives real results. Failing to do so leaves you susceptible to wasting valuable marketing dollars to reach customers that either aren’t a good fit for your business or won’t drive long-term profitability. Why risk that?

Set aside the time to build a focused customer segmentation strategy — and don’t be afraid to be critical every step along the way. The more you hone in on the right customers now, the more effective your digital acquisition efforts will be down the road. Focusing your customer segmentation strategy on only the customers with real potential to drive long-term value for your business is what differentiates how a Digital Economist (vs. a digital marketer) approaches and executes on digital customer acquisition campaigns.

Now, if you hit a roadblock as you begin tackling these five steps on your own, don’t forget that we’re here to help. Just give us a call.

Check out how LQ puts customer segmentation into practice by downloading the Sun Basket case study today — and see how we’ve helped them turn more of their most profitable customers into actual subscribers!

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.

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.

NewHomeGuide.com is an industry leading resource for home buyers searching for new home developments. As the industry and consumer preferences shifted from print to digital, NHG knew they had to adapt in order to maintain their prominent position in the market. After investing in a strategic website launch to grow their digital presence in 2017, we were selected by NHG as the digital marketing partner to optimize their acquisition strategy via SEM and CRO.

“What has been most impressive is LQ Digital’s ability to be agile and drive changes at a speed that we weren’t driving internally. I have tapped into marketing experts that continuously strive for high performance to improve our digital acquisition and are aligned with our growth. I look forward to our next phase: which is driving even higher quality that results in even more impact for our clients.”

– Ashley Arnall, VP of New Homes

Download the case study and learn more about:

• How NHG doubled lead volume while reducing CPL by 68%
• The benefits of optimizing your marketing spend across channels to achieve your business KPI

Download the Case Study

The benefits of affiliate marketing can be a real game-changer. Here’s why.

There are a number of reasons why brands haven’t leaned head first into affiliate marketing (also known as “partner marketing” or “performance marketing”). Almost by virtue of its name alone, it’s managed to earn a negative, albeit entirely undeserved reputation. A big part of this stems from the fact that many people still don’t have a firm grasp around what it is or the kind of value it can deliver. Many marketers just don’t realize that building, growing, and nurturing a strong affiliate marketing program can be the game-changer for them. It can be that missing “trick” in the bag that enables brands to dominate digital “shelf space” like never before. That is, as long as the program is managed efficiently. Unfortunately, the opposite is more often the rule than the exception. This is a big reason why affiliate marketing, in spite of all its benefits, has regularly become an afterthought in the face of more tried-and-true paid advertising.

Fortunately, there are many ways to avoid the pitfalls of a poorly managed program. We’ll get to that in a second. But first, it’s worth taking a moment to brush up on the basics and clear up any confusion around what affiliate marketing really is. Simply stated, affiliate marketing is a way for a company to sell its products by signing up individuals or companies (“affiliates”) who market the company’s products for a commission on leads or sales. It’s essentially like on-boarding a third-party sales force to get your brand in front of more consumers. For this to be successful, you have to not only select the right affiliates to promote your brand, but also take a hands-on approach to managing that relationship every step of the way. That’s the only way to get results.

Unfortunately, starting a program on your own can oftentimes feel a bit overwhelming. Many brands just don’t know where to start or which affiliates to reach out to in the first place. The good news is that LQ knows a thing or two about managing a healthy affiliate marketing program – and can alleviate a lot of these “unknowns” for you. We also take a lot of pride in our unique approach. For starters, we like to say that we measure our partners “beyond the pixel.” What does that mean? Simply put, we seek to understand the total value of the customers being generated by affiliates by looking beyond the transactions – leads and sales – happening only at the platform-level. We examine the business models of our affiliates to assess which partners generate the most valuable traffic vs. those who simply operate at the lower end of the funnel. And even in those cases, if a low funnel partner is the right strategic fit for one of our customers, we’ll consider it. What this all basically means is that we don’t approach affiliate marketing programs in a one-size-fits-all manner. No two customers – or affiliates, for that matter – are the same; how we craft a program for different customers shouldn’t be either.

To prove that this approach really works – and trust us, it really does – here’s a story about one of our customers in the meal kit delivery service category. Before coming to us, this customer had taken a one-size-fits-all approach for managing their affiliates. The problem with this, as we hinted at above, is that doing so does not allow you to drive the most value from those partners or truly understand the real value that can be extracted from each partner. So, to change things up, we cherry picked a few affiliates who were already running non-brand paid search campaigns and decided to take the reins on managing payouts and optimization. Now, here’s the fun part: back in August 2017, these partners were generating roughly 100 orders; today, they are projecting over 2,000 orders. Because we were better able to identify the overall value of these partners and have the know-how around how best to work with them, we were able to blow our customer’s expectations out of the water – and at a lower cost than they would have ordinarily paid for direct search campaigns.

As you can see, nothing about running a successful affiliate marketing program is done on “autopilot.” The more you put into your program, the more you’ll get out of it. When done right, affiliate marketing, as part of your overall digital marketing strategy, can be a huge catalyst for growth and help you extract the greatest amount of value from every digital marketing dollar spent. If you haven’t considered building an affiliate marketing program in the past, here are a few reasons why you should reconsider doing it now.

First, affiliate marketing is an effective way to expand reach in ways you couldn’t do on your own. For example, you may not have a full marketing team at your disposal to manage brand promotion every day. Even if you do, you may have hit a plateau with your current digital advertising efforts or have simply exhausted all of your available marketing channels. Affiliate marketing essentially opens up a new avenue for driving leads and generating sales. It’s also a great way to expose your brand to more of your most profitable customers. Given that most affiliate sites are “specialists” in their respective categories, you’re almost guaranteed – more so than with your paid search and display efforts – that the consumers visiting those sites are specifically looking to engage with a brand like yours.

Second, affiliate marketing is a more economically-efficient way to use your digital marketing dollars. Affiliates get paid by multiple brands and, therefore, have larger combined digital marketing budgets to work with. This also means they have more leverage to bid for prime ad inventory at a lower CPA than any one brand would have on its own. So, why go at it alone, trying to get top spot at a higher CPA and ultimately compete with these affiliates, when they can do this all for you at a lower (blended) cost? You shouldn’t. Just avoid overlapping your digital advertising efforts with those of your affiliates; doing double duty on the same consumers in a perceived effort to get top billing or drive more leads won’t double your results. It’ll just sap your marketing budgets – and fast!

Third, you pay affiliates a commission to do the heavy lifting – even more if you’re asking them to do the bulk of your digital marketing for you. The expectation is that they’ll drive real results for your brand. And once you see that happening, you’ll likely spend more with them to keep the momentum going. Unlike your own SEM efforts, however, where you pay for clicks with no guarantee of purchase, you can potentially minimize your risk with affiliates by only paying them for leads that convert into a purchase. This is the biggest benefit of affiliate marketing programs. When it works, it really works. As more leads and sales come through, you’ll find yourself dedicating more time, money, and resources into managing and growing that program.

And lastly, the more you build your relationships with affiliates, the more your rankings and reviews will improve on their sites. The more your rankings improve, the more positive influence your brand will have over the consumers that visit those sites. The more influence you have, the more interactions you’ll get. It’s a “halo effect” and a “domino effect” at the same time. For lesser known brands, affiliate marketing can truly be make or break. In fact, we’ve seen this make an unknown brand go “mainstream” quickly – and actually compete successfully against larger competitors. Affiliates lay it all out there for consumers to compare and contrast. Rubbing shoulders with the big guys on an affiliate site is not only a great way to get noticed, but also an effective strategy for gaining credibility, even more so if you don’t have huge marketing budgets to work with.

Affiliate Marketing Really Works

If you haven’t caught on by now, affiliate marketing can be a true game-changer for you brand. It can lead to tremendous brand growth by getting your brand in front of more of the right consumers, generating more valuable leads, and driving more sales than you could have ever achieved through your own digital advertising efforts alone. However, this is only possible when you do it right. Building a healthy affiliate marketing program takes time, patience, technical expertise, and a willingness to be hands-on from start to finish. Fortunately, with LQ by your side, you can rest assured that any steps you take to build your affiliate marketing program will be done with only one goal in mind: to grow your brand in a big way.