Brilliant marketing can turn a good business into a bigger business, but there are limits to what it can do for businesses that can't meet their customers' expectations. We've written at length about the merits of measuring lifetime value from paid search customers and folding some fraction of that value into customer acquisition success metrics. Recognizing that attracting new customers also creates highly profitable repeat business allows companies to invest more aggressively in growth and do so without sacrificing profits. However, if the customer's first experience with a brand is lousy, the reverse effect takes hold. New customers become less valuable in the long term leading to reduced profits from freely returning repeat buyers. This in turn requires a business to generate more profits from the first order which can mean pulling back marketing efforts or underhanded tricks to generate higher ticket purchases initially. This can lead to a downward spiral. If we think of the impacts in paid search alone, the consequences become quite clear. Customer A has a lousy experience with Acme which sells widgets -- maybe Acme's widgets are poor quality relative to their competition's or to their cost, maybe their fulfillment operations or customer service dropped the ball -- whatever may be the case, Customer A was left with a poor impression of Acme. How does this manifest itself in paid search?
- Lower Click-Through-Rates: The next time Customer A is in the market for Widgets, not only will she search rather than navigate directly to Acme's site, she's disproportionately less likely to click on Acme's link.
- Lower Quality Scores: As the CTR drops, QS drops making the ads appear lower on the page for the same bid.
- Lower position on the page leads to less traffic and fewer sales.
- If Customer A does click on Acme's ad, she's disproportionately less likely to make the purchase because of her previous experience with Acme. "Oh, I remember these guys..."
- Reduction in conversion rates leads to lower bids to reach the same efficiency targets pushing us further down the page.
- As lifetime value erodes, efficiency targets have to be reduced to maintain profitability pushing Acme's ads even further down the page One might object that the number of unhappy customers are too small to impact performance, but remember we're not talking about average searchers, here, we're talking about people who actually buy widgets online after a paid search and have been alienated by a bad experience. It is this "creme de la creme" searcher that Acme has alienated, not average Joe. Compounding the issue is the viral effect created by social media. Not only has Acme annoyed Customer A, they run the risk of being spurned by everyone in A's social network as well.
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