This is a story about how choosing the audience with a higher CPA resulted in a lower CPA.
That doesn’t sound right.
Any digital marketer knows the rules. Test a few audiences, pick the ones with the lowest cost per acquisition. Then put more budget into them so you can acquire customers with the best return on ad spend. That’s how you run cost-effective campaigns. Basic math.
So why did the team at Classy Advertising do the exact opposite? And why did they reduce CPA by 33% as a result?
To understand cost per acquisition you have to measure the whole customer journey.
Setting up a “full-funnel” AB test
Classy works with a brand called Maskk, helping them expand and reach customers in new markets. So one of their main objectives is to help Maskk acquire new customers as inexpensively as possible.
But Classy understands that customer journeys aren’t necessarily contained within a single campaign. So they came up with a way to take both prospecting and retargeting campaigns into account when evaluating overall cost per acquisition and set up a Facebook campaign to test it out.
To start with, they set up an A/B test of two prospecting audiences which have performed well in past campaigns. Both audiences followed best practices, but B was more precise than A, so they expected B to perform better.
Then they set up a retargeting campaign with audiences capturing users who initially arrived at the website through each of the two prospecting audiences. The retargeting audiences were set up in the exact same way.
The results may surprise you…
Despite expectations, when it was time to evaluate performance Audience A seemed like the clear winner. Its CPA was about 30% lower than Audience B.
However, the retargeting campaigns confirmed what Classy and Maskk already suspected. Customers from Audience B were 3X more likely to convert through retargeting than those from Audience A. So when the CPA between prospecting and retargeting was combined, it became clear that Audience B was actually the more cost-effective one.
One of the things that’s most interesting about this experiment is that it shines a light on how prospecting strategy impacts retargeting performance. In order for retargeting to perform well, you need to have customers visiting your website who are actually interested in your products.
And conversely, in order to understand whether you’re getting good quality customers from your prospecting, look at your retargeting campaigns.
It doesn’t mean that the more expensive prospecting audiences will always give you better retargeting performance. But it does mean you can’t always take prospecting CPA at face value.
It’s also important to consider the different buying journeys of different brands and products. Customers can take longer to convert for some products and less time for others. Looking at your different marketing strategies and channels as one buying journey is the key to truly understanding your marketing performance.
Thanks to Classy and Maskk for making us a part of this cool experiment.
Read the case study to get all the details about the audiences and how Maskk improved their campaigns as a result.