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Oracle Data Cloud Blog

  • January 14, 2016

Think your marketing campaign failed? Think again…

This week's blog is contributed by Trent Salazar, Data Scientist, Oracle Data Cloud.

When it comes to new customer acquisition and campaign success, what are the key takeaways to learn from? Campaigns that effectively attract new buyers may do it at the expense of immediate campaign returns.

Successful brands understand the long-term value of new customers. And they look to metrics like Penetration Lift to gauge success in these situations.

Let’s look at some Key Stats:

  • Of campaigns that failed to drive incremental sales, 33% generated a statistically significant lift in Penetration Rate, according to stats from 500 recent Oracle Data Cloud studies.
  • Existing buyers of a brand spend twice as much and generate 4x more incremental sales per household, relative to new buyers.

Pop quiz: do the numbers below indicate that the campaign was a success or a failure?

Norms Benchmark

Metric

Value

Percentile against Norm

Topline Revenue Increase (%)

0.4%

24th

Lift in HH Penetration

6.5%

85th

Return on Ad Spend (ROAS)

0.1x

30th

The answer to this question usually depends on which side of the advertising fence you’re on. Media providers typically look at these results as an unmitigated disaster, while advertisers are much more likely to see the silver lining. There’s no denying that a ROAS of 0.1x – indicating that the sales generated by the campaign only cover 10% of its costs – is not so great. To get the full story though, you also need to consider the lift in penetration.

Think Your Marketing Campaign Failed? Think Again!

How Can a Campaign have Strong Penetration Lift but Weak ROAS?

If you are trying a new razor for the first time, do you buy the 2 cartridge trial pack or the 12 cartridge refill? When we looked at consumer buying behavior across hundreds of CPG brands, we found that new buyers of a brand spent 48% less relative to existing buyers. We see a similar relationship when we look at sales lift - the dollar per household increase caused by the campaign – where existing buyers generate close to 4x the lift per household of new buyers.

These numbers suggest a tradeoff between generating incremental sales and acquiring new customers. Of the campaigns in our Norms database that failed to drive incremental sales, 33% generated a statistically significant lift in Penetration Rate. In these cases, it’s especially important to remember that ROAS compares the cost of a campaign to the immediate return it generates; future sales that result from attracting new customers may not be included in the calculation.

Key Takeaways

While ROAS is a useful metric for gauging the immediate impact of a campaign, metrics such as Penetration Lift and Lifetime Value of newly acquired customers also need to be considered when judging the full performance of a campaign. Success or failure? It’s all in how you look at it.

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Photos: Syda Productions/Shutterstock

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