Lots of lead gen numbers are interesting. But only one number is vitally important.
It’s what old-time direct marketers called “the allowable cost per order.”
Instead of obsessing on clickthroughs, conversion rates and cost per click, focus on what it costs to create a customer.
When you invest more to create a prospect than the prospect will invest in you, you’re out of business.
The wild card, of course, is time. When you know the prospect will be profitable over time, you can feel comfortable losing money on the actual acquisition.
The math that lets you turn this wild card into a dependable method of projecting revenue is woven into the design and measurement of your backend.
Backend upsells and downsells, tripwire email sequences, alternate offers, these all drive the math that lets you calculate your allowable cost per order.
Take each offer you make, then use historical data and common sense guesswork to project future response and revenue.
When you can’t get the historical data you need, go into your funnel and add the tags you need where you need them.
Once you’re comfortable with your numbers, plug them into the free Harvard Business School Lifetime Value Calculator.
Once you’ve roughed out a few different scenarios based on revenue opportunities woven into your backend, determine your target profit margin. Back the margin out of the LTV, and you’ll have a good idea of what you can invest in acquiring a lead.
Actually, this is your investment to create a suspect. You’ll need to move this suspect through the funnel to become a lead.
Google Analytics is great. But data has a way of distracting us. Stay riveted on the one number that matters, how much you can invest to create a customer.
Do this, and you’ll follow a proven strategy that has been building profitable businesses for almost a century. It’s virtually the same arithmetic Max Sackheim used when he and his partners launched The Book Of The Month Club back in 1926.
Sackheim, by the way, was a brilliant copywriter. He invented the concept of negative response. This is the tactic that prompts the member to tell the club not to send the book or the plate or whatever.