Best Practice: Optimizing Your Channel Mix

Stop flying blind and make informed decisions to maximize the return on your ad spend. While many marketing platforms can tell you which campaigns are bringing you the most customers at the best price, they fall short when it comes to evaluating the long-term quality of the customers you're acquiring.

Imagine you are running campaigns on two different marketing channels, 'A' and 'B', each with its own set of costs and results. Channel 'A' brings in customers at a cost of $50 per customer, while channel 'B' costs more at $75 per customer. Customers from both channels spend $60 on their first order. At first glance, we'd agree that channel 'A' performs better because of its lower cost per customer acquisition - especially in terms of first order value. But the true measure of success goes beyond that. What if you discovered that customers acquired through channel 'A' tend to return their products rather than buy again? On the other hand, customers from channel 'B' continue to engage with your products over time and become loyal.

Your marketing platforms are not able to provide you with this information. However, with RetentionX you can measure the quality of resulting customers for each channel and know when the ROAS based on LTV exceeds 100% (payback period).

Optimize your marketing channel mix by following our 3 steps:

Step 1: Track your Channels with UTM Tags

To evaluate the quality of your conversions, you need to track your customers' marketing journeys. To do this, include UTM parameter tracking in all your marketing activities. Once you start tagging and tracking your links with UTMs, you will understand where your traffic is coming from.

We know that UTM tags are not ideal for getting absolute numbers or channel attribution, but they are perfect for all averages like LTV, AOVs, or share of new customers acquired. For this analysis, it does not matter if some customers are not assigned to the channel.

Step 2: Identify your Most Effective Channels

Under Best Channels you’ll find all metrics needed to understand your channel  performance. Monitor the correlation between acquisition path and resulting customer quality with LTV. LTV takes into account all contribution margins generated by customers who were exposed to a specific UTM source at the time of their first purchase and determines their average. Channels that bring in higher LTV customers are your most effective channels. RetentionX's insights go beyond that and identify which channels are performing significantly better or worse than others. And that knowledge is priceless!

Step 3: Optimize your Marketing Channel Mix

Focus your resources on channels that deliver higher-quality customers, maximizing your overall return on ad spend and building a sustainable customer base for the future.

Shift budget to best channels:

Customers from your best channels have higher loyalty and lifetime value. That's why it's strategic to allocate more budget to this channel:

• Cost Reallocation: If numbers show that these channels are delivering significant results, consider increasing the budget for these channels to acquire even more high-value customers.

• Higher ROI: By investing more in these channels, you are likely to achieve a higher return on investment over the lifetime of the customer. This means that while the upfront cost may be higher, the revenue generated from these customers in the long run will significantly exceed the initial investment.

• Relationship Building: Dedicating resources to these channel allows you to focus on building meaningful relationships with customers. These relationships can lead to positive word-of-mouth, referrals, and an overall positive brand image, further enhancing customer acquisition in the long term.

Reevaluate worst channels:

Customers from your worst performing channels tend to show limited loyalty. Here are strategic approaches to handle this situation:

• Refine Targeting: Analyze the audiences and their behavior across these channels. Identify segments that are more likely to become loyal customers. Refine your targeting strategies to attract this segment, and potentially modify your advertising approach to appeal to their preferences and needs.

• Messaging and Offers: Reevaluate your marketing messages and offers for these channels. Tailor your messaging to address potential pain points that lead to product returns. Offer incentives for repeat purchases, exclusive deals, or personalized recommendations to encourage customer loyalty.

• Cost Reallocation: If efforts to improve these channels do not yield significant results, consider reallocating some of the budget from these channels to more profitable avenues. Resources can be channeled into strategies that have a proven track record of acquiring high-LTV customers.

Not using RetentionX yet?