While customer behaviors are highly linked to psychology, a business marketing executive would want to have a mathematical model that explains all these influences.
You will want to have a statistical probability distribution that explains how customers enter and exit your business.
You would also want to know what influences have a big effect on your marketing and whether you could do away with some.
When you determine the mathematical computations that matter in your business, you are highly likely to convince the CEO to invest company money in marketing.
This is because you will be able to meet their stares and questions with hard-cold figures that explain the return on investment (ROI) of your marketing efforts.
Carrying out computations on your business also informs you of trends that you could use to forecast the business’s future. You can use Mathematics to see what makes a visitor stick and become a loyal customer.
In his book on ‘The Six Principles of Persuasion’, Robert Cialdini heavily leans on psychology to explain how you can influence your customers to buy from you. But you will ultimately need to measure each of these six principles and know which has the highest ROI.
Certain factors will influence the entrance to a shop, whether online or physical and this is what a marketer should be interested in; to know what triggers make customers come to a shop and why they leave.
You could even plot this on a line chart as a regression model explained by different variables. You could then go ahead to test whether each of the variables has any statistical significance and whether you could remove them from the picture without affecting your revenue.
Once you know the biggest influencers in your marketing, you will add more effort to them while ignoring any other variables that do not have that big of an effect.
Mathematical Calculations that you need to compute in your business
- Cost of acquiring a customer (CAC)
If you are using paid advertising and paid $200 to generate leads where you got 5 customers, then acquiring one customer is $40. You get it by dividing the total number of customers by the advertisement cost.
- Return on Investment (ROI)
You can also go ahead to compute the return on your investment to see whether it was worth paying for the advertisement or not. If the customers convert, bringing in a profit of $300, then the ROI is (($300-$200)/$200)*100%=50%
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- Consumer Factors that Influence marketing
You can examine what affects your online marketing by regression analysis, where you can tell what variables really matter to your business. We explore this here:
1. Traffic to your online business platform
You have heard that having an active online presence on social media, websites and online chat will positively influence the number of customers you will get.
But does it really?
The only way you can tell is by testing this variable but creating a control experiment where you bring down your online presence for some time and see how this affects your business.
Digital marketers and SEO experts will tell you that you need to work on your search engine optimization techniques to see an uptick in your customer acquisition efforts.
Measuring this is easy since you could use big data analytic tools such as Google Analytics that show you how many customers you get from your different traffic sources.
The metric, though, does not tell you the quality of traffic that you are getting. It could be that your visitors are nothing but bots who come, visit and vamoose into thin air.
You might be getting real visitors who are quickly put off by your content and go back to the search engines to search for better content. The only way to tell your visitors’ quality is by examining your bounce rates and the dwell time on site.
You have probably heard that creating lots of content will bring in more revenue to your business.
The only way to know whether this is true is by testing content as a single test variable in your business. Does adding content have a good return on investment, or should you ditch it?
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2. Giving out freebies so that your customers can reciprocate and social proofing
One tactic that Robert Cialdini swears by is giving out freebies to customers so that they can feel indebted to buy from you the next time they are around.
But what if you invest more in giving out freebies than the return you get on your investment. It will be a big loss to your company and you can expect a tongue lashing from your CEO the next time you have a board meeting.
Robert Cialdini also speaks about the value of having social proof in your marketing efforts. Here, he advises that businesses should use famous faces and brands so that their customers can trust the business and buy from them.
At times, this might attract a cost which you should be able to calculate its ROI to see whether it is effective or not.
Compute the cost of acquiring each customer and the return on investment of this acquisition. If the ROI is good, you can go ahead to ramp up your acquisition efforts.
Draftkings has reported that the cost of acquiring each of their sports betting members into the business is $371. The company spends heavily on ads and relies on media influencers to get coverage and word out there.
Fortunately for them, because the customer’s lifetime value is estimated to be $2500. Their acquisition efforts, therefore, pay off.
3. Conversion Rate Optimization (CRO) on your website
The color and feel of your call-to-action buttons have a direct correlation to your conversions. But how would you know whether green is better than red CTAs without measuring this mathematically?
How would you know whether adding a comparison table does increase your sales without singling out this variable and testing it?
Well, conversion rate optimization experts advise that you do A/B testing of your CTAs, comparison tables and any other thing you feel could increase your leads. This way, you can determine what sells and what doesn’t please your customers.
Frosmo says that a 10% improvement in the CRO of an igaming website will reduce the customer acquisition cost by $41 per player while increasing the profit margin by $8 per player.
The site gives hacks that can improve your igaming website, such as tailoring the platform to individual needs and trying to retain the customer for longer on the website.
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