April 18, 2023

Budget Adjustment

Here's a subtlety you likely deal with.

Assume a segment of customers had 10,000 buyers last year. This year the segment has 12,000 buyers.

Let's pretend that you are holding your retargeting budget constant this year ... you are essentially spending the same amount year-over-year at a segment level. Now, I realize you are not executing retargeting at a segment level, you execute it at a budget level. But your budget-level decisions impact segment-level performance.

Pretend that the segment of customers above has a 40% annual repurchase rate. Pretend that retargeting accounts for 10% of the 40% annual repurchase rate ... 4%.

Because you are spending the same amount but have 12,000 customers instead of 10,000 customers, your repurchase impact is (10,000/12,000)*0.04 + 0.36 = 0.833*0.04 + 0.36 = 0.0332 + 0.36 = 39.3%.

Stated differently, when the customer file grows but the budget remains constant, rebuy rates decline. Not a lot (in this example) ... but something to think about.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Summer Schedule

As usual, my summer schedule will dial back just a bit ... maybe three posts per week instead of five, sometimes four, sometimes more. And y...