“Nigel, my cost per lead is TOO HIGH, what do I do!?”
Well…
… it’s not that simple, but people don’t understand that they get too hung up on the numbers and don’t look at the BIGGER picture!
Some factors you need to consider are:
- How much does a customer spend with your business?
- How long do they stay for?
- What’s your gross margin?
In the event, we hosted last December ‘Planning Properly: So that 2019 Is Your Best Year Yet’, Nigel delved into your Cost Per Lead and highlighted the importance of looking at the BIGGER PICTURE…
P.S –
Transcript
Last week, and I talked about how marketing is really a bit of creativity with maths. Okay, now that’s, we’ve seen some of that today, because all is rooted in the numbers, and you have to know the numbers to make it work. And I showed an e-mail that came in from an EC member who said, I could really use help on our Facebook campaign. We’ve been running an offer … And I’m not, for those of you there last week who saw this, I’m not making any apologies for going through it again, because it plays exactly to what we’re talking about now, does this. So he said, we’re doing a Facebook campaign, running an offer for one month free trial, quickly became apparent that the leads we generated over the weekend, we ran the campaign on Friday and Monday.
Budget is currently 15 pounds a day for those three days. It’s generating on average one lead per weekend, which is not a huge numbers. Ad copy for media is attached. The cost per lead is currently 42 pound 37. Please can you help us work out what to do was the question. There , you know, was triggered because 42 pound 37 in isolation is a high cost per lead on Facebook, which it is, that’s very true, because its typically a lot because you can get leads for one or two or three pounds, certainly up to 10 pounds and 42 pound appears to the uninformed to the uninitiated to be quite a high number, but thing about leads, and I’ve tried this, leads don’t pay bills, you can’t take leads to the bank, or they don’t count for anything. They are an important component in the business makes, but ultimately they are worthless because no money is attached to them. So, customers are what really counts.
So what’s missing from that email. Well, what other info do you do you, well, the facts. Three of the seven leads have become customers. Now that’s more interesting. What that means is we’ve paid seven leads at 42 pound 37 is 296 pounds, of which three have become customers, so I’m paying less than 100 pound per customer, make sense? Once you take the thinking was right, but it stopped too early the thinking on the email. Thinking those through, now we’ll say, well now this business, the customer spent an average of 300 pound a month in this particular business.
It’s not a dis-similar business to Jackies, yeah?. Gross margin of 50% and stay for an average of 20 months is very similar to Jackies in this business. So when you do the maths its obvious. That’s a candidate for best marketing campaign in the whole world ever. And I’ve not worked out the ROI. Let’s just do it now, someone grab a calculator. Let’s do these sums because this is a fucking amazing campaign. We got three customers who, so three times 300 is 900 pound, right, a month coming in. 900 pound a month, of which 450 is contribution, so 450 pounds a month of contribution and they stay for 20 months. That’s 9 gram, isn’t it? That is 9000 pounds of contribution for a total cost of 296 quid.
There’s not a single person in this room, and if I fill that stadium out there, there’s not a single person in that stadium that would not take that deal! Normally you would turn away 9000 pounds of contribution over the next 20 months for 296 pound today. You’d all do that. Yet the person that wrote this was genuinely concerned that they had a campaign that wasn’t working. And the reason, before you are laughing now, it was only because they didn’t understand what we were talking about today, because they didn’t know the maths and there but for the grace of God, go a whole load of people in this room right now.
And its why it’s so key to get this bit understood today, because when you understand this bit it liberates you. The reason why 2019 will be so much better for so many of you than 2018 was is because you properly understand the numbers and that will allow you to do things you never even dared think about doing before and you’ll look at your market in a completely different way. I’m quite excited about those, but its such an important point, that’s why.
For quite a lot of you in the room, there are a lot of different … this does not apply everywhere, we saw with Claire and with Rachel and with Jackie, three fundamentally different business models in terms of how this needs to be thought about. Yours might be different, again, try it. Has to, this planning comes down to, there’s not a one size fits all. You’re going to have to work this through for your business.
