Ok, here's something I posted over on LinkedIn. Send me an email with your answers, or leave a comment over there with your thoughts.
This topic came up earlier today and generally comes up every two weeks - it's a topic that is challenging for my client base to deal with effectively.
A company generates 40% of annual new customers in the late November - mid December timeframe. An analysis of new customers illustrates the following:
Jan - October Newbies (60,000): Profit per New Customer = ($4.00). Year 1 Future Profit = $12.00. Year 2 Future Profit = $10.00. Year 3 Future Profit = $8.00. Year 4 Future Profit = $6.00. Year 5 Future Profit = $5.00. Total Five Year Future Profit = $41.00.
November 1 - December 31 Newbies (40,000): Profit per New Customer = $2.00. Year 1 Future Profit = $7.00. Year 2 Future Profit = $5.00. Year 3 Future Profit = $3.50. Year 4 Future Profit = $2.50. Year 5 Future Profit = $1.75. Total Five Year Future Profit = $19.75.
A few questions for you, the intrepid marketer.
Is it a good idea to acquire new customers in November/December (hint - the answer is yes)?
From a marketing standpoint, how should you as an e-commerce marketer treat new customers acquired in November/December? Should these customers be treated differently? If the answer is yes, explain how you would treat these customers differently?
Should you ever not acquire a customer if you can acquire the customer profitably at the point of acquisition?
Are you able to see these fundamental differences in customer behavior using ROAS reporting? If the answer is no, what do you need to be able to see these fundamental differences in customer behavior?
In this case, the brand lost money acquiring customers from January - October. How long of a payback window do you believe is acceptable to lose money acquiring a customer?
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