In Marketing, it is essential to track and understand the value and performance

Question

In Marketing, it is essential to track and understand the value and performance of your advertising. Two key metrics can help determine if that marketing is on track 1. The Lifetime value of a customer 2. The cost per acquiring a new customer (CPA) Based on the scenario outlined below, calculate the Lifetime value of an average customer, the CPA of the advertising per channel, and make a final recommendation as to which marketing channels are the best for this business. Scenario - Dan owns a business that sells hot sauce, called Hot Sauce Adventure Club (HSAC). This business is a monthly club that ships hot sauce directly to your door every month. There are three different packages that a customer could buy: 1. 1 bottle per month for 12 months, at $12 per month. 2. 1 bottle per month for 3 months, at $15 dollars per month. 3. 3 bottles per month for 12 months, at $30 per month HSAC can expect that 25% of customers will re-purchase a package after it finishes, but only once more. What is the lifetime value of a customer per each package? Marketing Spend HSAC buys advertising on Facebook and Google and runs multiple ads on each. HSAC makes a profit of $3 dollars per month on every customer. Based on that and the lifetime value above, what do you think is an acceptable CPA for HSAC? Calculate the CPA's for each ad below and make a recommendation as to what HSAC should do Facebook: Ad 1-Monthly Cost-S500, 10 new customers acquired Ad 2-Monthly Cost-$400, 7 new customers acquired Google Ad 1-Monthly cost- $1000, 40 new customers Ad 2-Monthly Cost-$600, 60 new customers

Explanation / Answer

Qs.13 Correct answer is option b i.e return on investment or return on marketing investment.Because return on investment is one way of considering profits in relation to capital invested.Return on marketing investment is the matrix that can be used to connect marketing performance to the financial performance of the organization.

Qs.14 Correct answer is option d i.e Because the higher the customer lifetime value is the more the company should focus on meeting their needs.Because the purpose of the customer's lifetime value matrix is to assess the financial value of each customer.Calculating customer's lifetime value helps the marketers understand that not all customers are important equally.Based on the customer's lifetime value the marketers predict the most profitable group of customers,understand their need and focus more on them rather than on less profitable customers.

Qs.15 Correct answer is option b i.e dashboards allow managers to see performance data in real time and quickly make changes,if needed to improve the performance.Because an effective dashboard provides a unified view of "how we are doing".This enables a manager to make adjustments and corrections,maximize the effectiveness of marketing and boost marketing return on investment.

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