Channel Operation | If I give you 10 million, how would you spend it?

I believe that those who are involved in promotion are not unfamiliar with such scenes. As market competition intensifies, the cost of acquiring traffic is becoming increasingly expensive, especially high-quality traffic.

To attract new customers , we must not only ensure the volume of new customers, but also consider whether the final revenue can cover the invested budget . Especially for the placement of performance-based advertising, every investment corresponds to an output, which is a big challenge for every promoter.

Today we will start with data and talk about how to use the two indicators of customer acquisition cost and ROI to analyze the effectiveness of channel delivery, allocate budgets reasonably, and complete KPIs.

1. Customer acquisition cost

Usually, what we call customer acquisition cost refers to the cost of acquiring an effective user . The definition of effective users is based on the KPIs of product assessment (downloads, registrations, payments, etc.).

For some tool products, the assessment indicators are usually download/ activation volume ; for some financial /community products, the assessment is generally based on the registration step, while e-commerce products are more stringent, and most of them will regard new payment users as valid users.

Correspondingly, the current advertising settlement methods of channels are generally divided into the following categories:

Since each channel has a different settlement method, a simple conversion is required to compare the customer acquisition costs of each channel.

CPT=PV* CTR *CPC
CPM＝CTR＊1000＊CPC

For example, channel A pays based on CPC, with one C (click) being 0.5 yuan; channel B pays based on CPM 10 yuan, with an average click-through rate (CTR) of 2%, which converts to CPC = 0.5 yuan; channel C pays based on CPT 1w/day, with an average daily PV of 20w, and an average CTR of 10% for the ad slot , which converts to CPC = 0.5 yuan...

The above conversion based on CPC standard is applicable to estimating the click cost of channel advertisements before delivery , and is not the actual customer acquisition cost. Attracting users to click on ads is only the first step in promotion. From clicking to actually becoming our effective users , users will go through layers of conversions . Therefore, when evaluating the cost of acquiring customers, we also need to focus on the conversion rate. Let’s look at an example:

" Movie tickets" or "red envelopes"

If you want to promote an APP for buying movie tickets in the ad space below (new users can receive red envelopes after registering), there are two versions of promotional copy to choose from:

1) Movie tickets;

2) Receive red envelopes;

Which version would you choose?

If this position is settled based on CPM/CPT, then we can choose copywriting that is more click-worthy, such as "Receive Red Envelope", to increase the click-through rate and reduce the cost per click; but if it is settled based on CPC, it is not recommended to do so.

Why?

Although the click-through rate of "receive red envelope" is higher, the users attracted are not as accurate as the term "movie tickets", and the success rate of converting them into effective users will be lower , and your cost per click is fixed, which leads to an increase in customer acquisition costs .

For example, the CPC price is 0.5 yuan, and "Get Red Envelope" attracted 1,000 clicks, but only 50 people were eventually converted into effective users. The customer acquisition cost is (0.5X1000)/50=10; although "Movie Tickets" only attracted 300 clicks, 100 of them were eventually converted into effective users. The customer acquisition cost is (0.5 X 300)/100=1.5.

From the above examples, we can see that for advertising settled by CPM/CPT, you can appropriately consider using some stimulating materials/copywriting to increase the click-through rate (CTR) and allow as many users as possible to enter the subsequent conversion process; while for advertising settled by CPC, you need to focus on more accurate users to avoid cost increases caused by invalid clicks .

2. ROI

The ultimate goal of controlling customer acquisition costs is to acquire more users with a fixed budget , which is also the core responsibility of promotion.

So does it mean that it is good if the customer acquisition cost is low enough?

Imagine that you spent 1,000 yuan to get 1,000 people to download your APP. Is this price low enough? But the actual value they generate is far less than 1,000, which means that your investment is losing money.

If a product wants to ensure continuous user growth, an important principle when screening channels for delivery is to ensure positive ROI (Return of Investment), that is, the value that can be contributed by the user during his or her lifetime > the cost of acquiring the customer . Of course, for some products that are entering the market in the early stages, they need to rely on large-scale deployment to quickly capture market position and establish a massive user base, so ROI may not be a consideration in the short term.

In the actual delivery process, how do we calculate the channel ROI?

ROI = (Revenue * Profit Margin) / Cost of Launch

In order to correspond to the customer acquisition cost mentioned above, we will calculate it based on a single user, and the revenue will be replaced by AR PU (Average Revenue Per User, which can be simply understood as the average customer price).

ROI = (ARPU * profit margin) / average customer acquisition cost

For example, we have been running a campaign on channel A for one day, the customer acquisition cost is 50, the user ARPU brought in is 100, and the product profit margin is 10%. The calculated ROI for that day is 0.2. Assuming that users consume at this pace every day, the investment can be recovered in 5 days.

However, due to factors such as retention rate , the value generated by users is not linearly related to time. Therefore, the ROI on the same day can only help us roughly determine the payback period of the channel. A more accurate method is to look at the cumulative ROI after a certain period of time, that is, to look at the value generated by users during this period of time/the cost of delivery.

In summary, through the two indicators of customer acquisition cost and ROI, we can effectively evaluate the effectiveness of channel delivery, adjust the delivery strategy in a timely manner, and reasonably allocate the budget to those channels that can bring value to the product, so as to obtain continuous user growth.

Mobile application product promotion service: APP promotion service Qinggua Media advertising

This article was compiled and published by the author @言小酥 (Qinggua Media). Please indicate the author information and source when reprinting! Site Map