The True Cost of Building an Audience

Here at Wicket Labs, we work hard to give our customers a more complete picture of their video business by combining data sources and delivering new insights based on that. One interesting observation that has emerged from this work is that we sometimes see trial acquisition being used interchangeably with customer acquisition, and this can be misleading.

Trial acquisition cost (TAC) is the average amount of money that a company spends to gain one new free trial user. This is an interesting number because it is a very good indicator of how effective marketing efforts are at convincing consumers to try your service. This is not the same as customer acquisition cost (CAC) which is the average amount of money that a company spends to gain one new paying customer. In other words, it’s a measure of how well marketing efforts target consumers that are willing to buy your service. In simple terms, TAC measures how well you sell your value proposition and CAC measures how well you deliver on it.

The difference between these two numbers is dictated by the conversion rate of trialists into paying customers. This is where the rubber hits the road. CAC gets proportionally larger than TAC as conversion rates get lower. Here’s where this gets interesting if you dig into the data: some campaigns are very low cost from a TAC perspective, but end up being expensive from a CAC perspective (the one that really matters) because they generate below average conversion rates.

We often see campaigns that focus on one piece of content highlight this delta between TAC and CAC. Customers are attracted by the alluring content, watch it, but don’t find anything else of interest, and leave before converting. With no intervention, this can end up being more expensive than expected. In the Wicket Scorecard, there’s an easy way to look at this:

Trial Drivers by Series chart

Fig. 1 – The Trial Drivers Wicket can be pivoted to see which genres, franchises, series, seasons, and titles are the first items people watch when signing up for a trial to your service.

What can you do to keep TAC as close to CAC as possible, or in other words increase your conversion rate, while still hitting your customer acquisition goals?

The three numbers to pay attention to, are:

  1. TAC: how much is it costing you to fill your funnel?
  2. Volume of new trials: is your funnel big enough to meet your goals?

    You can see the combination of these numbers here:

    trial acquisition cost chart

    Fig. 2 – Trial Acquisition Cost Over Time is a quick way to see if your costs are trending where you expect them to be.

  3. Conversion %: Are you keeping CAC close to TAC and meeting your subscriber goals?

    You can look at Conversion and CAC together here:

    Free trial conv. % and CAC charts

    Fig. 3 – Free Trial Conversion Percent and Customer Acquisition Cost (CAC) KPIs

There are a few ways to intervene if the numbers aren’t adding up:

  1. Promote content with high entertainment value & highest correlation to conversion. These are easy things to see in the Wicket Scorecard, and easy to act on.
  2. Use look-alike campaigns to find the best target customers. By leveraging our Customer Happiness Index (CHI) scoring system, you can fill the top of your funnel with potential customers that are close approximations to your best customers. This, coupled with good content as a hook, is a very effective way to attract the right customers and improve both your conversion rate and lifetime value.
  3. Percent stalled trialists chart

    Fig. 4 – Percent Stalled Trialists KPI

    Connect trial users to relevant content early and often to help cement the value proposition. You can easily see who is stalled out in their trial…(Fig. 4)

…and intervene with good content suggestions to help them re-engage, and see more value in the service.

If you’d like to learn more about how the Wicket Scorecard and our customer success team can help you optimize your trial to paid customer pipeline, drop us a line!

 

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