Performance-Based Acquisition Marketing

12 Jul

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I recently completed a year-long period managing acquisition marketing for online brokerage firm  One of the most important changes that I brought about during that tenure was to transition our markting focus from being purely CPA-based to consider not just cost of an account, but also its resulting quality.  Recognizing that different channels, and even specific partners within a channel, could yield dramatically different kinds of accounts was an important insight that led me to drive for this change.  Additionally, I recognized that a multi-year focus on getting as many, cheap accounts as possible had yielded an unbalanced, unscalable marketing machine.

In order to justify spending in more expensive channels like online banner display advertising, we had to be able to prove that the resulting accounts were “worth it” and generated sufficient revenue to justify the acquisition cost.  In order to do this, we had to overcome a lack of tracking and reporting tools to evaluate new account value based on acquisition source.  We had to solve this on two fronts: First, through the development of a reasonably comprehensive data warehouse which brought together account-level trading details to the website user-level at which we could track the original source of a new account. Second, through the adoption of tracking technologies that enabled us to more definitively attribute a specific new account to one of our multiple marketing channels.

Once we had established a way to track performance, we had to settle on standardized measures of account quality.  With input from our Finance team, we settled on using the average of an account’s first three months of account activity, extrapolating that average out to a year, and dividing that annualized revenue figure by our cost of acquisition.  If the average “payback period” on the accounts from a particular channel (ultimately, we got this down to the publisher and affiliate level), was less than one year, we considered that a success since the average customer lifetime of new accounts was a multiple of that.

While we only had a short period of time running this new approach at full-speed prior to Zecco’s acquisition by TradeKing (I apologize I can’t therefore share robust figures to demonstrate the impact), it proved to be an exceedingly valuable marketing management tool.  We could quickly evaluate a new display advertising partner’s promise, and re-allocate spend to the partners that were outperforming the others.  We were also able to identify specific affiliate partners were substantially under-delivering on account quality and remove them from our network.

I’d be happy to get into more detail to help other online marketers understand this methodology and approach.  Get in touch!

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