Identifying the Most Important ROI Metrics in the Redemption Loop

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There is no questioning consumer appetite for location-based, real-time offers or the momentum of publishers who have created the space. Industry experts have projected annual sales to eclipse $4 billion in 2015, up from about $2 billion in 2011 and just $873 million in 2010—a 35 percent annual growth rate.

Yet for all of this incredible popularity and growth, most merchants and marketers struggle with measuring the impact of online promotions, including daily deals, coupons and location based offers. A March 2012 survey by shows that fewer than 20 percent of marketers have full confidence in their fundamental ability to measure campaign effectiveness and, subsequently, even less confidence in their ability to allocate budget and communicate campaign ROI to senior leaders. A similar survey conducted by Forrester Research reveals that 86 percent of marketing leaders rate measurement and accountability as their top challenges when it comes to planning and budgeting.

If daily deals and offers are to establish long-term relationships with merchants and marketers, they can deliver the best ROI by identifying those metrics that will deliver not just immediate results, but more importantly, lasting customer relationships.

First step is to weed out the metrics that include “serial bargain hunters” — these customers fail to deliver long-term value, or “customer lifetime value.” They typically appear in “net new customers” data.

“Serial bargain hunters” — these customers fail to deliver long-term value. They typically appear in “net new customers” data.

To best understand the effectiveness of online offers, a combination of data around “sales lift” and “customer lifetime value” will deliver marketers and merchants the information they need to evaluate which channels bring them the most valuable customers.

Developing a clear understanding of sales lift and lifetime value related to a promotion provides merchants and marketers with a wealth of insight that is essential for the marketing process. What percentage of a marketing budget should be allocated for promotions? How should promotions be structured? What levels of discounting or give-aways are compelling? What types of customers and prospects should be targeted for promotions? Having this knowledge leads to more efficient marketing spending and improved profitability, both in the near-term and over the life of customer relationships.

This post is adapted from the First Data white paper “Going Beyond Redemption: Closing the Loop with Card-Linked Offers.” Next week, read about strategies for collecting data around these key metrics. In the meantime, download the white paper to learn how to improve your ability to leverage offers into lifetime customers.