As another national online shopping festival comes to an end, we’ve seen a number of e-commerce brands striving to attract more customers and boost sales in the past few weeks. How did their efforts work in this campaign? How many brand managers felt confident about their new consumer acquisition? Were they able to attract the right customers and what impact did consumer acquisition have on their revenue? IlluminAnalytics, a boutique of the Illuminera Group, focuses on marketing consultancy driven by big data. After studying 10 major imported brands on Taobao and TMall recently, the group helped them understand the results of consumer acquisition strategies and the related marketing ROI.
Disappointing Results of Customer Acquisition Study
With the primary goal of maximizing customer acquisition most economically and efficiently, most brand owners will be disappointed at the results of the study. The research shows that the influence of customer acquisition strategies is limited in terms of growth in sales. Comparing the data of different infant formula foods (IMF) brands, it is noticeable that the number of new customers actually did not have a significant positive impact on the revenue.
However, it is too soon to conclude that new customer acquisition is of no value to brand growth. Further studies reveal that there is one specific category of new customers who actually benefit the brands – they would purchase the product 3 times or more in a defined period. Therefore, the number of these loyal new comers strongly effects the number of brand users in the future.
Yet, in general, such loyal customers only account for less than 20% of the total new customers. It further implies that more than 80% of the acquisition resources are wasted.
What should we do?
To ensure a long-term and high-quality brand performance, we must say goodbye to the old-fashioned, one-size-fits-all, and quantity-driven way of customer acquisition. Instead we should focus on the quality and value of new customers. Furthermore, brands need to look into the following two key factors for a successful customer acquisition:
1. Category potential
According to the study, around two-third of the new customers buy the product for only once and make no more purchase in the category (at least not on Taobao and Tmall). It can be speculated that a considerable part of the purchases made by these customers are made temporarily or for someone else.
2. Brand loyalty
Some new customers have higher value – they buy the same product on multiple occasions. However, about half of them switch to other brands after one or two purchases. While some of these users may naturally love to explore new products, chances are that they are not satisfied with the new brand they previously tried.
As a consequence, brands face two essential issues in customer acquisition:
1. Which potential customer is more likely to make continuous purchases in this category?
2. Which potential customer is less likely to switch to other brands in a short term?
IlluminAnalytics suggests that the brands should focus on the following aspects in customer acquisition aiming at sustainable growth:
1. Expand the source of customer acquisition to explore new and efficient communication channels;
2. Assess the lifetime value of the new customers;
3. Establish a predictive model to forecast the lifetime value of all types of potential customers;
4. Direct resources to the acquisition of high-value new customers.
