Many marketers still focus on CPC and ROAS as the most important digital marketing metrics, but this distracts from the ultimate goal: profits.
The shift to profit-driven marketing begins with reevaluating traditional KPIs. Certain
metrics are so ingrained in marketing plans that there's no consideration of whether they're
still relevant. While tracking and analysis will always be critical to success, metrics have
to serve the end goal.
At Wpromote, we care about not only our clients’ digital marketing strategies, but also their business goals and ultimately, their bottom line. We've recognized the importance of profit-driven marketing for a while now, and have partnered with Google to continue to lead the way by concentrating on customer value.
This approach prioritizes profit above other metrics and uses volume and customer lifetime value to paint a fuller picture of long term success. While investment may initially appear to be less efficient, the profit-driven approach actually improves efficiency by maximizing results from top-performing customers. Instead of only optimizing within a certain budget, spending is flexible when the profit allows it.
Key idea: profits optimize the tradeoff between price AND volume
In the above example Campaign A looks to be the more efficient option. CPA is half that of
Campaign B, and they have the same margin per conversion. But going beyond ROI shows that
the profits for Campaign B are much higher and consequently justify the higher CPA.
Without the full picture this important difference in profits would be lost.
If this isn’t part of current marketing strategy, now is the time to shift the mindset. Competitors may already be utilizing this approach and gaining market share. Reassessing current KPIs and analyzing long term potential illustrates the logic behind this change. Everyone from paid search managers to CMOs and CFOs must begin to see marketing as a profit center and not a cost center.
Key idea: to gain market share marketers should invest in their most profitable customers based on their life time value
While this mentality may be a change, it should be a welcome one. Businesses must always be
concerned about the bottom line, and prioritizing marketing profits keeps everyone aligned
on goals and success. Profit-driven marketing may seem to represent the “it takes money to
make money” adage, but it also requires clear insight into success metrics and long term
Focusing on profits also highlight the important impact and accomplishments that marketing has on the business as a whole. Marketing should not be seen as only a cost center, and this solves that issue.
Marketers must know the metrics that support this approach. Customer lifetime and lifetime value are key to leveraging a profit mindset. These depend on numerous factors tailored to each industry and business. Data must guide the way.
Once these metrics are defined, profit should be the main KPI that drives marketing decisions. Segmentation should be updated to reflect the difference in customer lifetime value and investment must align with profit goals as well. This will likely look very different, but that’s the point!
Wpromote partners with clients to generate digital results. To be successful, we
must achieve an in-depth understanding of each partner’s business. We use
extensive data analysis to model customer LTV and better predict potential
outcomes. Armed with information, we’re able to make smarter investment choices
and recommend more efficient opportunities for our partners.
With profit as the ultimate goal, we all succeed.