When Craig Ballantyne from Early To Rise interviewed me last week, I found myself coming back to the same point again and again. He was asking me to explain how to be successful with online advertising, or media buying. We covered a lot and you can click here to listen in to the live webcast. (My interview starts around 2:28:00 and last time I checked, the audio/video was not in sync. Hopefully they fixed that.)
If you watch the interview, you’ll see the main point I kept making was the importance of focus. With marketing and advertising you have two options. You can:
- focus on finding and testing strategies you can afford
- focus on improving your lifetime customer value
Of course, these are not mutually exclusive activities, but your focus should really be on #2 above. In this article, we’ll look at both options.
Focus On Marketing Strategies You Can Afford
This is typically where businesses spend their time and energy. You take a look at an opportunity like online advertising and you run the numbers to see if it makes sense financially. In other words, you figure out if you even have a chance to generate ROI. Then you make a yes or no decision based on your existing customer value and existing conversion rates.
For example, if a new customer is worth $200 and it’s going to cost you $1,500 to generate 200 website visitors, then you know you need a conversion rate greater than 3.8% to be profitable. If your conversion rate on average is about 2%, then this is not an attractive option for you and you’ll most likely stop right there.
Can you see the flaw in this thinking? It’s based on a fixed mindset. You have accepted that your customer value and conversion rates will not, and can not change. (If you’re not familiar with fixed vs. growth mindset and you’re a Main Street Inner Circle member, then go read my introduction to April’s newsletter. If you’re not a member, then click here to join and gain access to our archives.)
This advertising option may not be attractive right at this very moment, but if you can find ways to increase your customer value and improve your conversion rates, then you can certainly make it profitable. That brings us to the main point I made in my interview with Craig…
Focus on How To Increase Customer Value
I used the advertising example above because the costs are so obvious. However, this lesson applies to ALL of your marketing – SEO, affiliate/JV partners, TV, radio, print, etc. Every marketing activity has time, resources, and monetary costs associated with it and that’s typically how businesses calculate which ones they can afford.
I’m not saying you should ignore your current situation. I’m recommending you don’t fall into the trap of thinking you can never advertise or use some tactic because the numbers don’t make sense right now. Again, that’s a fixed mindset and successful businesses have a growth mindset.
If you can not afford a certain tactic, then your goal is to find a way to make the numbers work. Most likely by increasing your customer value.
Here’s a quick example. When I started working with one of my private clients they were selling a product for $27 with no back-end revenue model. We had extremely limited marketing and advertising options. We basically had both arms tied behind our backs…
But rather than focusing on ways to get cheap traffic and cheap sales, we instead focused our energy on building up that $27 value. Through a whole lot of testing and optimization, we slowly increased the customer value from $27 up to over $150 in 4 years. As we increased the value, we were able to expand our marketing options and the business growth snowballed as a result.
So if you’re not happy with your marketing and you’re frustrated with the high costs of advertising, then you now know what to do. Quit whining and get to work increasing your customer value! :)