I was talking to a client recently about their business, and I asked them one of my favorite questions:
“How do you get customers for your business?”
He paused for a moment, and told me his method. Now, it wasn’t the worst method I’ve ever heard, but it wasn’t consistently producing him the customers he wanted in his business.
After he was done explaining how he got customers, I asked him, “How much is it costing you to get a customer?”
After looking at me quizzically for a few moments, he admitted he didn’t know.
He was throwing 10’s of thousands of dollars per year at a strategy with no viable way to track its’ effectiveness.
The lack of understanding of your customer journey is the single biggest threat to you growing your business where you want it to go.
I’m talking about where your leads come from, at what cost, the customer conversion % and the lifetime customer value.
Traditional marketing (radio, TV, etc) doesn’t allow you to truly know your metrics. Sure, you know the cost to put your message in front of their audience, but you don’t know how many people responded to the message and/or converted to becoming a customer.
This is one of the key powerful elements of Facebook Advertising… You get all the data!
Not only do you know your ad spend, but you see how many clicks, leads, and customers you got in your business.
Take a look at this screen shot of a Facebook ad campaign that I’ve been running for only a few days.
You can see the cost per click (28 cents), 313 total clicks on the ad, 3 purchases. This ad also generated 96 leads (not shown) at a cost of under $2.50 per lead. Powerful stuff!
So here are 2 important metrics you need to know in your business:
Cost per lead
What does it cost you to acquire a lead? Regardless of online or offline strategy, this is a crucial number to track.
Luckily, Facebook advertising makes it very easy (if you set it up correctly).
Here’s a tip for you:
Isolate out your lead actions so you know this # more clearly.
If you’re running traffic from a few different sources online (say, a blog post, a mailing list AND a FB ad strategy), send them to different landing pages so you can track opt-ins (a.k.a. “leads”) accurately.
If you were to run a newspaper ad or a direct mail piece, put a different phone # as the call to action so you can track calls to that # specifically (compared to a normal office phone #).
Depending on your advertising strategy on Facebook, it’s possible to get leads anywhere from around $1 to as much as you want to spend.
You might be thinking, what is a good “cost per lead” that I should shoot for?
My answer is, “it depends.” It depends on what you’re selling, what % are buying it, and the Lifetime Customer Value (LCV) which tracks lifetime sales, up-sells, repeat purchases, etc.
So if you have a core service that is $1,000, and you close 1 out of every 10 leads you get, then you can spend up to $100 per lead ($100/lead x 10 leads = $1,000 ad spend; you close 1/10 leads for $1,000 product and you’ve broken-even).
What if you could get those 10 leads for $50/lead instead? Well, you’d get 2:1 on your advertising budget and you’d do that all day. In reality the ROI can be much better than that, but it’s a good starting point.
What if you’re running a webinar getting $4 leads? 100 leads would cost you $400 in ad spend.
100 leads x $4 leads = $400 for 100 leads
If you have a standard show-up rate of around 20% you’d get $20 people on your webinar.
100 leads x 20% show-up rate = 20 attendees on your webinar
If you close 10% of them into your product or service (let’s say that’s a $500 mini – course), that’s 2 people buying your course
20 attendees x 10% conversion = 2 customers at $500/each
So, in this example you spent $400 to make $1,000. Better than 2:1 ROI on your marketing dollars.
Lead Conversion %
The next thing to look at is Lead Conversion %. If you had 10 people to talk to about your product or service (either online or offline), what % would you convert to customers?
Let’s say you are a service-based business that has a core service where you make anywhere from $10,000 to $12,000 per procedure. If 10 folks came into your practice that needed what you offer, what % do you think you could convert? (You should know your metrics, by the way).
If you close 10%, you should be spending up to $1,000 per in-office consultation.
Ok, here’s the fun part. Once you really know your data you can start to play with the multipliers.
Let me explain. If you had 10 leads and you closed 10%, you’d have 1 customer. But what if you could up your closing % to 20%? You’re already spending the money to get the leads, but now you are increasing your close % and you’re doubling your money.
What if you offered an up-sell? If you had 10 leads, and now you’re converting 20% (2 customers), but one of those buys an “up-sell” that is 2x the price of the first offer? Can you start to see how this can help your business?
Do you have any down-sells? If you had 10 leads come in, 2 buy (yay!) but I’m more concerned about the 8 that didn’t buy.
Why didn’t they buy? Do you know? Have you asked them?
If it was a price-based objection, do you have any down-sells that could keep them as customers?
You see where we’re going here?
Achieving a clear vision and strategy is crucial for you to optimize the value you provide to each customer.
If you need help figuring out your customer journey, drop me a line on Facebook or in the comments below. I’d be glad to help you audit your process and identify the gaps.