Is there a mismatch between the conversions you are tracking and the actual revenue you are targeting?

Measuring CAC when you don’t really have a customer yet?

For many businesses, their digital marketing conversions are only leads or potential clients with wide variations in actual revenue. Let us look at a few examples.

• If you are an optician, your conversions from digital marketing are largely bookings, typically a eyesight test. However, the revenue from the test can range from nothing (no-show) to repeat orders of expensive prescription glasses and more.
• Similarly, if you are a financial services provider, your conversion from digital marketing is typically an application form for a loan. The actual revenues and results however depend on later events such as approval, interest rates and performance of the customer.
• A SaaS business or anyone selling subscription services measures conversions as new subscribers. How long do they however stay, typically after an introductory discount period?

Tracking and measurement of campaigns and ads typically only provides the cost (CAC) for potential revenues. Most businesses simply accept this as a fact of life and carry on their digital marketing activities with a view to minimize the cost of a booking, application or new subscription. The actual revenue generation is left as a different business altogether.

The devil is in the details

If you simply measure and optimize the cost for potential revenues, you run the risk of attracting the wrong kind of customer. Let us say that you have two campaigns with widely different conversion costs. Without additional information, you would discontinue the high-cost campaign. However, the expensive campaign could provide potential customers that spend more, stay longer and perform better. Correspondingly, the low-cost campaign can provide potential customers that you really don’t want, like bargain hunters, no-shows and loan defaulters.

Trying to bridge the gap

There are different ways to partially mitigate the information gap. As you probably have guessed, excel sheets and hard work are key elements. The challenge with these alternatives is that they require a lot of time and effort and hence do not allow for adjustments before the campaign has ended and the money has been spent.

Google provides some ideas on how to track offline conversions. The idea of posting data back to Google however raises the issue of GDPR compliance. Additionally, as Google is phasing out third-party cookies, perhaps the effort will no longer be worthwhile.

Measure what matters real-time with Digtective

The marketing software Digtective provides a real-time overview of the performance of your digital marketing activities. Measuring customer acquisition costs directly against customer lifetime value is now possible, and you can optimize your marketing spend towards profits instead of an uncertain proxy (leads). Digtective also bridges the gap for offline conversions by connecting with your CRM so you can compare your digital marketing spend real-time against any relevant metric or combinations of metrics.

Relax, Digtective does not exchange personal data and is GDPR compliant. No third-party cookies, no javascript, no fingerprinting.