Do you ever wonder how much revenue resulted from a specific promotion? Let’s say you send your customers an offer for 20% off their next purchase, and 60% of them redeem that offer. How do you know how much revenue came in from that offer? After all, customers could have come in on their own and made a purchase, no offer necessary.
To measure the impact of a campaign, you need data, metrics and something else you might not have considered: a control group.
That sounds technical, right? You may remember the term from eighth-grade science class, but it applies to your marketing as well.
You need control groups to effectively measure the success of your campaigns. If you want to calculate ROI and lift in profits, it’s nearly impossible without a control group.
In this post, we’ll answer these commonly asked control group questions:
- What are control groups?
- Why are control groups important?
- How do control groups help you prove the value of specific campaigns?
What are control groups?
When you send a customer engagement offer using Thanx Campaigns, you send it to two groups: a control group and a campaign group. The campaign group receives the promotion; the control group does not.
Simply put, a control group is a small subset of customers that aren’t marketed to. You let the control group behave as they normally would. Without any influence, you can compare their actions against those you do market to, which make up the test group.
By comparing the results of the control group and the campaign group, you get measurable results like ROI and lift in profits that stem from specific campaigns.
Why are control groups important?
Control groups have become the gold standard in marketing metrics. Marketers who rely on them get answers to specific questions, like:
- Am I giving away things for free?
- Would the customers who redeemed an offer have come in any way?
- What’s my return on investment?
- How much revenue did a specific offer bring in?
Aside from answering important questions, control groups offer additional benefits including:
- Calculating your ROI
Control groups provide profit data. Period. Who doesn’t want that? Merchants realize the power of data in a digital world, but all the data in the world is pointless if it doesn’t correlate to your bottom line. A control group is the best way to access data that shows how your marketing efforts impact your revenue.
- Staying focused on KPIs that matter
Marketers use a variety of channels and platforms to reach customers, and each offers its own analytics. Your email service provider may only show opens and clicks, while a social platform shows clicks and engagement rates.
At the end of the day, marketers have a bunch of charts and graphs and not one of them actually measures revenue. Opens and clicks are nice, but they’re nothing more than vanity metrics.
With a customer engagement platform, you can send emails and/or push notifications to customers and measure your results in metrics that matter – revenue-based metrics.
- Making data-based decisions with confidence
Control groups eliminate wasted time and money. When you see how much revenue was generated from an offer you know its value and you can use that knowledge to make sound decisions going forward.
For example, data may show that BOGO promotions drive more revenue than percentage-based offers. Knowing that you can adjust future promotions.
There are countless decisions that you can make based on data that is calculated when you use a control group. And you can make those decisions with confidence because you know they’re backed by data, not guessing.
“Every time I sent a targeted offer with Thanx I learn from it. The robust data I get from our Thanx campaigns informs our decisions, helps make me a better marketer, and grows our business. That’s what it’s all about.” – Cheyenne Terbrueggen, Marketing Manager, Elephants Deli
How do control groups help you prove the value of a specific campaign?
A control group is the only way to actually measure and prove the value of a specific campaign, but how does it work?
Here’s how you get valuable metrics with a control group:
- Step #1: Pick a segment of customers
Decide which group of customers you’d like to receive a special promotion. For example, you might decide to send your VIP customers a 20% off offer that’s good towards their next purchase.
- Step #2: Send the promotion to the segment, minus 10%
Typically, you’d send the offer to everyone in the VIP segment. However, if you’re using a control group, 10% of the people in that segment won’t get the offer.
While it might not seem right to leave some of your best customers out, there’s a good reason. That 10% represents your control group. You need them to behave as they normally would without the offer to see what happens.
- Step #3: Evaluate your results
Thanx will do all the results number crunching for you and display your results in an easy to read and understand format:
In our example, customers that didn’t receive the offer spent $26. That’s your control group. These customers came in and spent money without any incentive or promotion.
Customers that did receive the offer spent $55. Obviously, customers who had an incentive came in and spent more than those who didn’t get the offer.
Obviously, the offer worked, but again, you’re trying to figure out how much revenue came from the offer. Again, we calculate that for you. Customers who received the offer spent 52% more than those who didn’t.
Digging deeper, you’ll find that we’ll also tell you how much total revenue is generated from the offer. In this case, the 20% off coupon resulted in a $3,000 increase to the bottom line.
And, as you can see, the promotion is good for another 22 days, so you’d keep getting updates as time goes on.
- Step #4: Use the data to adjust your marketing strategy
Over time, you’ll collect more data to fine-tune your customer engagement campaign.
For instance, you’ll be able to see what kinds of offers drive the most revenue, which channels (email or push) deliver the best ROI, and which segment increases their spending the most when an offer is sent.
You can compare the results and make strategic decisions accordingly.
Every merchant wants reliable data that drives customer engagement and sales, but it’s almost impossible to do without control groups. By using our control group feature, you’ll be able to see measurable and meaningful KPIs that actually impact your bottom line. You can experiment with different offers and see which ones work best for your customers, and your profit margin.