Key Customer Acquisition Metrics
Basic Customer Acquisition Metrics
This is Logan from Triple Whale, and today we're going to talk about new customer acquisition. Let's start digging into the summary page to learn about the metrics that are needed to really understand the math behind your acquisition costs.
So the first thing you'll notice here in Triple Whale is we have a Pinned, a Stat section, and your Shopify store section. So these metrics are coming directly from Shopify, and what we can do is we can blend some of these pieces of these metrics together to create a story around your new customer acquisition.
So the first couple things we're going to notice is that we have store metrics like sales, orders, taxes, customer acquisition, all of those things are available. As we scroll a little further down your page, you're going to stumble upon an expenses section. This is where we pull in your cost of goods sold and your shipping expenses.
This is actually what it costs to ship your products to your customers. So one of the things we find very important at Triple Whale is understanding your contribution margin. Essentially, at a very high level, what we're talking about here is the revenue that you brought in from your customers minus your variable expenses.
Now with Triple Whale, we kind of define variable expenses a bit differently than some other platforms, but it's important to think about the ad spend that it costs to acquire those new customers, the shipping costs for the orders that you sent to those new customers, and the cost of goods that it costs to actually deliver these items in general and create them. So what we're going to do is we want to understand when we acquire a new customer based on the amount we spent based on the shipping cost, based on the cost of goods, did we actually make any money?
Cause that's what most important here. We got to fill our bank accounts with some cash. So we're going to have to do some custom metrics here to find this out. But once it's set up, it's going to be run beautifully. So the first thing we're going to do is we're going to take our cost of goods and we're going to take our shipping and we're going to create a custom metric by clicking the COGs button, create custom metric.
Creating Custom Metrics
We're going to title this shipping cost per order. So we're going to take our shipping costs and we're going to divide that by the number of orders that Shopify reported on.
And you're going to go ahead and add this to your pinned section. So you can see already that we have this shipping cost per order here.
So on average over the last month, it's actually cost $8 per order to ship the goods that we've sold. Now we want to find out our cost of goods per order. So we're going to do the same thing, create a custom metric, but this time we're going to call this COGs per order. We're going to take your COGs metric and we're going to divide that by the number of orders that were placed in the time period. Also, add that to your pinned section.
Now that we have shipping cost and COGs, we're going to combine them into one metric.
So create a custom metric, call this shipping plus COGs per order, and go ahead and add those two new metrics that you just created. Shipping costs per order and COGs per order, add them together with the plus sign and add it to your pinned section. Now, this is very important. As you go into your stat section, you're going to have two metrics that are important to look at CPA, which means your cost per acquisition.
That's truly taking your blended ad spend and dividing it by the total number of orders, regardless of whether that was new or returning.
It's also important to run this metric on returning customers as well, or blended across all customers. But today we're going to focus on NCPA, which is new customer cost per acquisition. So these are orders that we've defined through Shopify that are coming from a new customer, not a returning, divided by the ad spend that it costs to get them.
So take your entire blended ad spend divided by new customer orders in the timeframe selected, and that'll get you your new customer cost per acquisition.
Applying Metrics to Your Acquisition Strategy
So the next step is we want to take the blended metric that we made, which was shipping per order, cogs per order. And now we want to add in the new customer cost per order per acquisition. So using the same method we used earlier, you want to take your cart, create custom metric, and you want to add NCPA to your shipping plus cogs per order metric. Now you have what we define as variable expenses.
The next step is to take your average order value and subtract it from those variable expenses, which will give you your new customer contribution margin. So we have that here and you can tell that over the last 30 days or so, we actually have a negative contribution margin per new order, negative $14.
So what does this mean? Realistically, this means that we're willing as a brand to take a net loss on the order and to acquire them, to acquire this new customer. So that means that over the next 60 and 90 days, we are going to have to make enough money to make up for our losses and ideally bring us profit because we need money in our bank to go out and buy new products and acquire new customers. So how do we do that?
Well, the next step is to look into the pixel, which you'll find a video below that describes how you can use triple pixel to go find new customers and measure the success of those actions. So beyond the pixel, we're going to do a couple of, we're going to look at a couple more places within Triple Whale to do some digging into your data. So the next thing we're going to do is go to customer insights and we're going to look at your LTV 60 90.
So while this is loading, what's very important about this page is we're going to display your AOV from new customers, so your average order value, and then we're going to show you how much those customers that were acquired in the time period selected: last three months, last six months, or last 12 were worth to your business, in 60 or 90 days after their initial purchase.
So it's really important here, my main man Saunder, who you'll probably see in some other videos here, has worked for some high end clients in the past and typically likes to shoot for 30% increase in LTV to AOV within 90 days. So you can see here that this brand has actually increased their 90 day LTV to AOV by 26.6%. So that's pretty good. They're doing really well there. So for someone who, let's take for example this brand who has a $90 AOV.
Well, what we know is on new customers because of the acquisition costs, the cost of goods and the shipping, it's actually costing them a net loss of $14 to acquire that customer at 90. But you can also see here that they increase their average orders within 90 days. The lifetime revenue is increasing by $25. So 25 minus to 14 that we lost originally gives us an additional $11 that they're actually making after 90 days of acquiring that customer.
So that's why this Triple Whale client is willing to take a loss in the first order because they know that their marketing funnel is so good, they're going to have those customers come back and repeat purchase and actually make them $11 within 90 days. Take that $11 gain across thousands of customers and you have yourself a viable business. All right, that's all for new customer acquisition for now, and we'll follow up soon with some more tactics and tips and tricks to manage and analyze your new customer acquisition.