Intro to Online Paid Placements

What we will be going over

• Intro to customer acquisition• Key Metrics• COCA• LTV• ROI

• Choosing the right Channel

Intro to customer acquisition

• Marketing: Customer Acquisition• Free (ish)

• Organic search• Inbound Referrals• Word of mouth• PR

• Paid• Online Ads• Offline Ads (newspaper, TV, Radio, magazines)• Direct Mail

• Sales- Turn leads into sales (only used for some products)

What are you trying to accomplish?

• Direct sales• Customers go online, see an ad, go to your site, buy a product• Customers sign up for a free trial with path to revenue later

• Indirect sales• Leads: Customers give phone #/email, then do a sales call• Trials: Customers sign up online to trial something in the real world• Email list signup: Customers sign up for emails• Customers become regular readers of your site, then buy something later

Match the goal to the product

• Tie of the month club- $25/month• Online SAT tutoring: $1K/3 months, unknown brand• Sell a Ferrari: $200K one time sale• Dropbox




Cost of Customer Acquisition (COCA)Steps in the funnel:

• Impressions• Priced as CPM = “Cost per 1,000 impressions”• Determined by

• Who the audience is• Ad platform• Ad type (newsfeed vs sidebar, etc)

• Clicks• Click through rate x cost per impression = cost per click• Determined by:

• Quality of ad• Match of ad to audience

• Post click conversion• Cost per click x conversion rate = cost per acquisition• Determined by

• Quality of site• Type of action required (signup for email list vs buy a Ferrari online)• Match of audience to site

• Post conversion sales• Some products require post-conversions sales step

• COCA = (CPM/1000) x (1/click through rate) x (1/conversion rate) x (1/post conversion sales rate)

Impressions

Clicks

Convert once on site

CTR

Conversion Rate

How to minimize COCA

• Buy as few impressions as necessary• Only show ads to people with a high likelihood of buying

• Get a lot of clicks• High quality ads well matched to channel• Find the audience most likely to click

• Get post click conversion• Have great landing pages• Different audiences will have different conversion rates

• Have as few steps as necessary

Great Landing Pages

• Your home page is NOT a landing page• You may need a lot of different landing pages• Components of a great landing page:• Short description of what you are selling• VERY LARGE calls to action• Very few options that are not desired action• Very short # of clicks between landing & completing action

A great landing page

Exercise: COCA

CrossFit Gym• Path to sale

• Customers see a Facebook ad ($10 CPM)• They click, go to a landing page (2% CTR)• They give their email address/phone to get a free class (5% conversion)• Sales person calls them, schedules free class (70% never get in touch)• They go to free class (50% show up)• They sign up for a membership (50% sign up from free class)

• What is COCA• What changes could they make to decrease COCA?

Key trick: UTM Tags

• What they are:• Tags at the end of URLs that identify ad

• When to use them• Each ad should have its own UTM code• All ads should have a code

• How to use them• Lets you calculate CTR, conversion rate, COCA BY AD• https://support.google.com/analytics/answer/1033867?hl=en (google “UTM

builder”)

https://support.google.com/analytics/answer/1033867?hl=en




Lifetime Value of Customer• Revenue per sale

• # of items per sale x revenue per item

• Gross margin• Profit per item / Revenue per item

• # of sales per customer• Over lifetime of customer, how many purchases do they make?• If it’s a subscription, how many months do they stay around?

• LTV = Revenue per sale x gross margin % x # of repeats• LTV = (# of items per sale) x (revenue per item) x ((item sales price – item

cost)/(item sales price)) x (# of sales per customer over lifetime)

LTV Exercise

• Selling Neckties Online:• $25/tie, $10 cost/tie, average 2 ties/checkout. • 2.5 repeats per customer• What is LTV?

• How can we increase this LTV?

Ways to maximize LTV

• Increase dollars per checkout• Sell higher cost items• Sell bundles of many items

• Increase Gross Margin

• Increase repeat rates• Actively market to your past customers to remind them• Sell subscriptions and auto-renewals!• Good products & customer service




Marketing Return on Investment

• ROI = (LTV) / (COCA)

• ROI decision making:• <1: you are losing money on your ads.

• You need to increase LTV, or decrease COCA• =1: breakeven. • >1: You are making more money than you put in. Advertise more!

• Beware cash flow issues with long-period LTV




Which channels to chooseChannel Subtype Demand Creation vs Fulfillment Audience Selection

Facebook Social • Demand Creation • Who is fan of what page, who is friends with who.

Facebook Targeted Paid

• Demand Creation• Demand fulfillment for

identity/interest based demand

• Who they are (demographics)

• What they are interested in

Google Adwords • Demand fulfillment • What they search for

Google Display • Demand creation• Demand fulfillment if well

matched to site

• What site they are on (interest)

Other Sites Display • Demand creation• Demand fulfillment if well

matched to site

• What site they are on (interest)

Which channels to choose (Part 2)Channel Subtype Pro Con

Facebook Social • Cheap to free • Very labor intensive• Less functional in “new

Facebook”Facebook Targeted

Paid• Insanely niche targeting

capabilities• Very effective when targeted

properly

• Technically challenging interface• Only works if well targeted

Google Adwords • Very effective for right product• Simple creative

• Clicks often expensive• Needs sufficient search volume

Google Display • Good for non time sensitive products

• Creative can be challenging

Other Sites Display • Great for very targeted niches • Negotiated individually, requires creative

Exercise: What Channels to use:

• Heating Oil Delivery• SAT Tutoring• Card that combines all your credit cards• Discount shopping browser plugin• Necktie of the Month