Lean Your Marketing: Have A Goal And A Target Cost Per Acquisition


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Okay, so you’ve figured out your key performance indicator— you’re all set, right?  Almost.  But to really make sure you understand whether your marketing is performing the way you want it to, you need to create a goal for your KPI that is specific and time-bound.  Instead of saying that you just want “more leads,” for example, say that you want 100,000 leads in a year’s time. Sure, this seems pretty obvious, but you’d be surprised how many clients I talk to don’t have specific goals in mind.  You’ll learn pretty quickly whether your target goal is realistic, but if you don’t at least put something out there then you don’t have a real yardstick to measure results against.

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Basically everything I’m recommending here comes from asking clients what they’re trying to achieve and having them answer,”????” Not only do they often not know what metrics are most important to them, they don’t have a goal in mind and they definitely don’t have a target Cost Per Acquisition, or CPA.  But this is a very important boundary condition to know, because it does a lot to dictate what marketing methods you’re willing to try and helps you figure out which ones are more effective.  If you are willing to pay $100 per lead, there are a lot more programs you can try than if you only want to pay $10 per lead.

Calculating Your Target Cost Per Acquisition

There are a couple of ways to go about this.  In one, you take the pot of money you have available for marketing, divide it by how many (we’ll just call them leads, but substitute your own success event) you want, and there’s your target cost per lead:

Marketing Budget $100,000
Lead Goal 25,000
Cost Per Lead $4

The problem with this method is that it doesn’t tell you if you’re losing money on every acquisition.  If you’re spending $100,000 to get $10,000 your business isn’t going to be one for the ages.  So the better method is to figure out how much value you get from each new lead:

Leads 10,000
% Convert to Customer 1,000
Conv % 10%
Lifetime Rev / Customer $150
Lifetime Profit  / Customer $50
Target Cost / Lead
Lifetime Profit * Conv % $5

Once you’ve used a method like this to figure out how much you should be paying to get people to your site, it will be easier to evaluate each new method to see whether it is working.

Next up: making tracking a part of your product plan.

Related:

Lean Your Marketing: The Slide Deck

Slide 1 | Slide 2 | Slide 3 | Slides 4, 5, 6 | Slide 7 | Slide 8 | Slides 9 & 10 | Slides 11 & 12 | Slide 13 | Slide 14 | Slide 15 | Slide 16 | Slide 17 | Slides 18, 19 & 20

 

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