It takes too long to optimize to that

One thing that marketers consistently get wrong is not thinking in cohorts. When you spend money today on advertising, you aren’t guaranteed that the full benefit of that spend will occur the same day you spent the money. This is especially true for products where it takes some time for users to complete the conversion event. So for example if you had a banking app and some share of users take more than a week to convert, looking at performance week on week will be problematic as you’ll always be undercounting the current week. This might mean getting your spend allocation wrong by underspending, only to later see that the cost per acquisition (CPA) has come in better than expected later on as conversions ‘caught up’. This is an issue because it limits your volume when times are good, meaning you miss opportunities. It also can be a problem the other way, in that when times are bad and performance degrades, you don’t cut spend quick enough as you’re not sure where things will land after conversions come in. Waiting for a few weeks to make optimization decisions is too slow, and leaves serious money on the table.

The solution to this that I’ve found works is to think in terms of cohorted conversions. Rather than comparing last week to this week for example, compare day 3 conversions for both weeks. That way you’re comparing like for like – always a 3 day window – rather than giving last week an extra 7 days worth of conversions. To do this you need to record both the day that you’re reporting on, and the day in which you recorded the data, every day for the full conversion window (usually 28 days). Once you’ve done that you can artificially limit the window to 3 days, or whatever works best for your product, and compare apples to apples. What you’re in effect doing is looking back in time at what you would have seen if you looked at the report 3 days after that point in time, rather than what you see now. The hope being that if your Day 3 conversions are a consistent share of what your eventual Day 28 conversions will be, you can make optimization decisions in days instead of weeks, and be more confident of where you’ll end up when you look back on this time period next month. Working this way gives you a consistent and stable benchmark to compare against, and increases your flexibility in being able to respond quickly to opportunities or performance issues.