Like nearly all retailers, a large health and beauty organization is facing escalating competition and CPCs on search. The performance marketing team realizes it can’t keep paying heightening costs to acquire the same levels of revenue from repeat customers.
At the same time, the team recognizes it can better coordinate its strategy on other channels. Retargeting, email, and direct can work together more cohesively to push customers to purchase once they’re in the door, or back in the door, from search.
They developed a new strategy for tackling Google Ads, one focused on identifying and treating new customers differently than returning customers. The ultimate goal is to achieve more granular return targets for new versus repeat customers, with repeat customers generating a much more efficient return than in the past.
This scenario is not an isolated case. Many performance marketing teams in retail are keen to understand how a new-versus-repeat customer model works for search. Some of the most common questions are: What should we know about this approach? What’s the process to implement it? How would we measure success?
Here are some best practices.
1. Realize the war for the wallet will be won at the top of the funnel
A new-versus-returning customer strategy can make a lot of sense in today’s competitive climate. Here’s why:
- Retailers can’t fight for the bottom of the funnel anymore. CPCs continue to rise in direct response channels like search. Retailers’ average CPC in Google paid search (text ads) grew by 14% in 2018, reaching $0.71, according to Sidecar’s 2019 Benchmarks Report: Google Ads in Retail. Google Shopping CPC averaged $0.57 in 2018, up by 4%. Competition in search is at a fever pitch. Retailers are moving the battle to the top of the funnel because they’ve realized the downstream benefits it provides to get in front of customers in the research stage.
- Most retailers own their customers less and less. Consumers have more options than ever in terms of where and when they shop. As a result, most retailers own their customers less, and need to work harder and smarter to secure loyalty. With that in mind, consider this: If someone who just purchased from you is now searching for products you sell using generic terms in a competitive space like Google, is that person really your customer? Or is she a prospect you need to re-acquire at the top of the funnel?
Both these realizations speak to the growing importance of the upper funnel. Similarly, acquiring new customers requires you to strengthen the top of your marketing funnel. And strengthening the top of the funnel, in turn, requires you to shore up the middle and bottom of your funnel so prospects move forward to conversion.