How do I set NPV values for different conversion events?
One feature of C3 is the ability to have a multi-step conversion process (AKA - multiple KPI's) and designate a different Net Present Value (NPV) for each one.
An example of multi-step conversion is the typical auto manufacturer. The first step is to define the different KPI's. Here's what we see for most in the auto industry:
'Build Your Own' vehicle or Car Configurator is where most consumers start today with Auto Manufacturers.
This process allows the consumer to learn about all of the features and 'build' their dream car.
There's a smaller segment of users who then seek to locate a dealer by clicking on the 'Find A Dealer' link.
And then a smaller segment who 'Request a Quote'.
Of the consumers who request a quote, there's an even smaller number who end up purchasing a vehicle.
Once these KPI's are determined, the next step is to under the relationship between them -- essentially .. what are the numbers of each of these events for the previous 90 days or more. For example, for the past 6 months here are the numbers for the example above:
- Build a Car: 200,000
- Find a Dealer: 100,000
- Request a Quote: 1,000
- Purchase: 50
Important note is that of the 200,000 consumers who configured and built a car online -- some of them may have just driven into the dealership and purchased and would NOT be included in this equation. That's an additional discussion about online contribution to offline sales.
Now we need to determine the percentages of each as they relate to the end goal of purchase by dividing each number by the total number of purchases:
- Build a Car: 50/200,000 = 0.00025
- Find a Dealer: 50/100,000 = 0.0005
- Request a Quote: 50/1,000 = 0.05
- Purchase: 50
If you are optimizing on a CPA basis, you will want your first KPI ('Build A Car') to be equal to 1. Do the following simple math:
1/.00025 = 4,000
Now multiple each of the KPI's by 4,000 to determine the CPA for each step:
- Build a Car: 50/200,000 = 0.00025 X 4,000 = 1
- Find a Dealer: 50/100,000 = 0.0005 X 4,000 = 2
- Request a Quote: 50/1,000 = 0.05 X = 200