Thursday, December 1, 2011

The Rising Cost of Customer Acquisition - I


Like the internet itself, Panalysis has seen online advertisers evolve dramatically in the past decade. Knowledge of best practice is increasingly the rule, rather than the exception and now more than ever, savvy online advertisers seek to extract the maximum return for their online investment.
In this series of help bytes, Panalysis will identify possible causes of Rising Acquisition Costs and we’ll be sharing a virtual shopping list of management techniques which we’ve found can temper the impact.


The Dutch auction pricing model used by Google in AdWords ensures that there is latent upward pressure on click costs. It measures a host of quality metrics about you and your competitors, then rewards the most compliant with better Ad positions and/or lower click prices.
Possible remedy = Look for fresh innovation which may have stolen the march in the market. The new offers you might need to match could include; *extended warranty, * up-sizing, *price discounting etc. Online shoppers compare offers – in an instant – just like high street shoppers do. Diarise to monitor your top 3 competitors’ websites at least once a month, preferably more often.
The consequence of not monitoring competitor innovation may mean no change to your advertising expense, but fewer conversions and higher acquisition costs. Our experience suggests there is no silver bullet. Rather it’s a hybrid of best practice techniques which will convince more new customers to do business with you and coerce the search engines to reward your online efforts.
Another helpful byte soon.

2 comments:

  1. These are some great and true thoughts about paid search. But if everyone goes for the matches you've mentioned don't you think this would also result in higher conversion and acquisition costs?

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  2. Thanks for your question.

    We've generally found that even in a saturated advertising space, most online marketers can find some truly unique selling point(s) and call-to-action - if they dig deep enough.

    Would the situation of everyone following best practice increase the mean CPA in the market? I doubt it. Our understanding is that the system rewards best practice and charges a premium for sloppy practice, in paid and organic.

    We have run tests with two competitors pitching the same product/ pricing.

    Ultimately one triumphs and we reason it is the way the public interacts with the content.

    Hope this answers and thanks again for posting.

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