Archive for January, 2009

How to Lower Your CPA

Thursday, January 29th, 2009

In my last blog, we talked a lot about why you should start paying attention to the average cost it takes you to acquire a new customer. In this blog we will discuss the many ways you can start to lower this average cost. By doing so, you can obtain much better results within the same marketing spends. AND given this current economic climate… who wouldn’t want to do that?

Below are the top 5 things you can do today to lower your cost per acquisition (CPA).

1) Track your results- Without conversion tracking in place, there is no way to accurately determine your true CPA. There are free website analytics available to you; and if you aren’t currently tracking your site visitors from entry point(s) to conversion point(s), we strongly urge that you do so starting now.

2) Always be testing – If you are happy with your current CPA then this step is not for you. BUT for the rest of us, we must always be testing. By testing, I mean testing everything. From your keywords and your pay per click ads to the creative on your banners ads and your landing pages.  Testing is something that the majority of online marketers fail to do. Yet, testing is the best way to see exactly what creative recipe’s works best for your customers.

3) Always be testing II - There are many testing methods (A/B testing, multivariate testing) for you to try out your creative ideas and concepts. The truth is that nobody knows what your customers will respond to best except your customers. Even your best creative talent and your best marketing talent can only guess whether or not people will respond better to a red button or a blue one. Better yet, let your customers tell you via their clicks and purchase behaviors. Testing lets you take the guesswork out of design and gives you real honest customer feedback. You’ll know if your design is a winner or a loser, real quickly.

4) Use Customer Retention Programs - the old adage, that it is much easier to keep an existing client than to attract a new one has never been more appropriate, especially in regards to our CPA discussion. The easiest way, by far, to lower your CPA is to bring your old customers back through your sales channel. Your former customers already know you, trust you, and are likely more willing to buy from you again. They just aren’t being asked.  Most Marketers get excited about the strategies and tactics used to attract new business and it is in the retention area where marketers usually fail.

5) Use Customer Retention Programs II – Most people know that email marketing to existing clients is the most cost-effective way to maintain a customer retention program. Most email marketing services providers offer very inexpensive platforms that literally cost you pennies per email to reach out to former clients. There are other programs, however, that can help! Other “retention” ideas include daily content updates (give people a reason to come back to your site), points/loyalty programs and personalized website experiences (like Amazon.com) that will keep people engaged with your brand.

CPA is a hot topic and likely will be for the foreseeable future. For marketers that can lower their effective CPA’s the sky is the limit. Literally. When you lower your CPA, you can gain a distinct competitive advantage and can actually put yourself in a position where you can make it financially impossible for your competition to play in the same sandbox with you.

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CYA with a Focus on CPA

Tuesday, January 27th, 2009

 Cost Per Acquisition
Definition = The average cost associated with acquiring a new customer.

 

Move over CPC, there is a new metric in town . . . and its name is CPA. The acronym, of course, stands for “Cost per Acquisition” and for Online Marketers CPA is quickly becoming the only metric that matters, especially in these currently foggy economic conditions. Of course, I exaggerate, CPA is neither new nor is it the only useful performance metric. Still, many smart marketers today are paying extremely close attention to the costs associated with acquiring customers; and by focusing on reducing those costs they are beginning to thrive while their competitors flounder amidst higher click prices and abundance of advertising supply.    

 

Below are 4 tips you can use today to make sure you are properly set-up for measuring your CPA:

 

1) Track your campaigns – The best and only way to ensure that your data is reliable and accurate is through conversion tracking, i.e. measuring your site visitor from site entry point to site conversion point. In fact, you won’t be able to measure CPA until you take this step. If you haven’t already done so, Google offers free analytics and easy instructions for setting up conversion (goal) tracking at http://www.google.com/analytics/.

 

2) Have different values for different conversion points – If have more than one conversion metric (and hopefully you do) then be sure to assign different values to those conversion points. An average lead, for example, may be worth $250 to you but an average value of someone opting into your email database may only be worth $10. Google Analytics uses an assigned goal value to calculate ROI, Average Score, and other metrics. A good way to value a goal is to evaluate how often the visitors who reach the goal become customers. If, for example, your sales team can close 10% of people who request to be contacted, and your average transaction is $500, you might assign $50 (i.e. 10% of $500) to your “Contact Me” goal. In contrast, if only 1% of mailing list signups result in a sale, you might only assign $5 to your “email sign-up” goal.

 

3) Your CPA is different from my CPA - Acquisition costs vary across industries and mediums, so make sure your CPA’s are meaningful and relevant to you. When acquisition data is available, try to determine if you are comparing apples to apples, so to speak. This is not always easy, as customer acquisition data can be rare, and the methodology is often shaky. Better to make sure that your CPA’s make sense for your own thresholds.

 

4) Calculate your CPA – Customer acquisition cost is calculated by dividing total acquisition expenses by total new customers. However, there are different opinions as to what constitutes an acquisition expense. For example, rebates and special discounts do not represent an actual cash outlay, yet they have an impact on cash (and, presumably, on the customer).

 

My next blog will focus on ways you can lower your CPA. But first things first, I wanted to make sure the process was started by focusing on the ways to set up and measure this key metric. While the CPA topic may be old news to many of you, still only 20%-30% of all online advertisers use their full tracking capabilities. Surprising but true.  It’s these same advertisers that aren’t paying attention to their CPA’s that are driving up your click prices. This is why now, more than ever, it’s so important to pay attention to your most crucial metric.

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Why you need Conversion Optmization

Friday, January 2nd, 2009
Why you need Conversion Optimization

A few weeks ago, I predicted that “conversion optimization” would become a significant factor in 2009 for most online businesses. Now, only a day into the New Year, I am even more convinced that 2009 will be the year conversion optimization gets its due.

Conversion optimization, simply stated, is the process of improving your site’s conversion rate (visitors to sales, visitor to leads, etc.). There are a number of ways to do this from the basic (a/b testing) to the complex (technologically-based landing page optimization programs) but your efforts put here can significantly impact your bottom line.

Below are reasons why I think you need a conversion optimization program and why I believe this will be the web’s next big thing:

1) The numbers make a lot of sense – For most organizations, small increases in conversion rates can mean giant increases in revenues. A customer selling $1000 widgets, for example, with 10,000 visitors and a 2% conversion rate makes $200,000 per month. If the site’s conversion rate goes from 2% to 2.5%, for example, this same customer makes $250,000 without any additional increases in expenditures (all things being equal). With dramatic increases like this example portrays, these numbers are too hard too ignore.

2) The cost of traffic is increasing – Almost everywhere across the board, customer acquisition costs are rising. Pay per click costs are rising…SEO costs are rising… comparison shopping engines costs are rising…blog advertising costs are rising…online PR campaigns are rising – the list goes on and on.  Blame the economy if you will but these increases are due to more competitors entering the market competing for your same clicks. AND these costs are only going to continue to rise. Conversion optimization, however, will help you “off-set” those rising costs. As soon as businesses figure this out, I am convinced more attention will be placed in conversion optimization programs.

3) Marketing budgets are shrinking. – Unfortunately, one of the first things to go in a down economy for most businesses is their marketing budgets. What marketing directors will be tasked with this coming year is to get more out of the same (or smaller) budgets…aka do more with less. With this is mind, those marketing directors that pay attention to conversion optimization will become the heroes of their organizations.  

4) Why lose 99% of your audience? – The old “one size fits all” method of web design and development may have worked in 2005 but it no longer is sufficient in 2009. YOU have many types of customers that come to your website and each has a different personality, profile, and need. Studies show that conversion rates are shrinking (to 1%, on average). With all of the knowledge we have and all of the advanced analytical tools, this is mind blowing to me. We, as an Industry, can not accept losing 99% of our audience. With a conversion optimization program, you can serve up different experiences to different profiles of people and reverse this trend!

5) It is cost effective – Many conversion optimization programs take the guess work out giving your audience what they want. Some tools are free but will demand a lot of your time and resource, while other programs offer performance guarantees. Either way, your efforts will be rewarded for spending time on improving your sites conversion rate.

In a way I feel like I did ten years ago when I was talking about ”search engine optimization.” Most people looked at me funny and had no idea what I was talking about. That is the look I now get when I mention Conversion Optimization. Yet, this time, because money is issue #1 for most Americans, I believe 2009 will be the year of conversion optimization!

If you are interested in learning more about a conversion optimization program, please contact Christine McKibban @  760-481-4626

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