May 30th, 2017
This is an excerpt from our latest guide, the eCommerce Guide to Improve CAC, LTV, and Conversions on Mobile. Download the full guide here.
For eCommerce marketers, mobile has never been more important. The fact that mobile commerce sales have increased by nearly 40 percent year over year should both excite and scare brands into focusing on mobile. Mobile will account for $284 billion in revenue by the year 2020.
It’s clear that mobile is becoming the standard for brand engagement, but it remains difficult to track and optimize for every single user. That user could be on an Apple or Android device, could have an older operating system, or use a brand’s app instead of the mobile web. But properly measuring and attributing mobile events remains a pain-point for many marketers attempting to test various channels. Additionally, linking users out of Facebook’s mobile app is becoming more and more difficult.
“Marketers are now forced to use different tools to measure each fragmented platform like email, social, website or mobile app; resulting in SDK congestion, duplicated data and wasted marketing spend,” wrote Branch CEO, Alex Austin.
He also listed three steps that marketers can take to improve their attribution methods:
These steps can help eCommerce companies focus on cross-platform strategies that attribute properly and allow them to fixate on providing a consistent user experience to customers.
Whether an eCommerce app is brand new, or already driving a majority of sales, this guide walks brands through the process of increasing and measuring conversions.
According to Criteo, mobile apps convert 3x better than the mobile web, which ultimately begs the question for marketers, how are you driving users to your eCommerce mobile app?
As we mentioned above, measuring the impact of your campaigns and user behavior is crucial to scaling your app and revenue. Among all the metrics that analytics platforms are capturing today, we have identified the three numbers that you should always track if you have an eCommerce app:
1) Customer Acquisition Cost (CAC)
2) Lifetime Value (LTV)
3) Click-to-Purchase Rate.
Customer Acquisition Costs (CAC)
eCommerce brands must always be aware of the cost to acquire a user and how it relates to their conversion metric. If an eCommerce brand is investing into a certain channel and acquiring users for $5, but their average lifetime value of a customer is only $3, they aren’t getting the ROI necessary to continue investing in that channel.
In order to properly calculate the CAC, simply divide all the costs spent on acquiring more customers (marketing expenses) by the number of customers acquired in the time period the money was spent. If a company spent $100 on marketing in a year and acquired 100 customers in the same year, their CAC is $1.00. You need to do the same calculation for each channel where you are investing money to acquire users. If you are benefitting from organic traffic, it will substantially reduce your CAC, but you have to account for the time and money spent in “SEO” efforts to have a fully-diluted CAC.
For example, one top brand’s leading acquisition channel for their mobile app is organic search and, more specifically, Adwords. By deep linking their Adwords to the relevant search content inside of their mobile app, this company was able to decrease their user acquisition costs by 16%, thus increasing the ROI of each user acquired through Adwords, and improving conversions by driving users to the mobile app. Their CAC was simultaneously decreased by testing and iterating on a channel that they knew was a revenue driver.