Our CoFounder and CEO, Justin Spring, is passionate about helping people manage their marketing reporting and optimization. He found an outlet for his “good deeds” through BringShare and Quora. We thought it would be helpful to round up all of Justin’s Quora answers each week and share them with the BringShare community.
If you are trying to make money, it starts with the financial side of the business…
How much is the average customer worth over 12 months? (as a start-up, it’s too difficult to guess lifetime value).
What is my gross margin? (calculate how much gross profit I generate on each customer in that 12 months)
Monthly Average Value of a Customer – This will give me an indication of how quickly I’ll get my money back.
Goal Cost Per Acquisition – This is the Average 12 month value times your gross margin.
Now, you know what you can spend on marketing to acquire a customer and how quickly you’ll get that money back. With this knowledge, you start to build and test a model with these metrics:
- Cost per Visitor
- Conversion Rate
- Actual Avg. Trans Value (as you grow, is it declining to holding steady)
- Cost per Acquisition
You entire job as a marketer at this point is to optimize these four metrics. Some suggestions:
- Cost per visitor – If buying display ads on a CPM basis, focus on testing ad creative to increase clicks. If bidding per click, focus on adding long-tail keywords that are less expensive to bring down your cost per click
- Conversion Rate – use Visual Website Optmizer (my favorite) or Google Website Optimizer to test landing pages. It’s amazing how the little things impact conversion rate. NEVER stop testing. It can always perform better.
- Avg. Transaction Value: email your customers, run promotions, etc… Keep in touch
- Cost per Acquisition: this number improves automatically with your improvements to numbers 1 and 2 above.
A digital marketer, above all else, must be analytical. She must understand how her company makes money: by spending less to acquire customers than they are worth. Armed with this knowledge, she needs to be able to back into a cost per visitor metric. Once she knows how much she can spend to acquire a visitor, she can develop a comprehensive internet marketing plan. The plan will involve continuous testing and optimization so she must stay focused and constantly be testing new ideas.
Ad Spend, Fees to vendors that support the campaign and cost of goods sold.
Most tools only include a ROAS (return on ad spend). This ignores the fees to vendors and cost of goods which can be misleading. If you aren’t careful, you can be losing money but appear to be doing great with a positive ROAS
I’ve been talking to BringShare users about this a lot lately and our SEO community is telling me that they are starting to focus less on the actual rankings and more on the results of those rankings. For example, your client may want to rank for a head term like “Structural Engineering.” While it’s important to have some idea of the ranking trend (improvement) for that keyword, what really matters is how many search queries drive traffic that include a portion of the head term. Some examples might be “structural engineering firm in Iowa” or “engineering firm with structural expertise.”
Prioritizing the results of the SEO efforts over the rankings will make an SEO’s life easier because it gets to the true value of search engine optimization and downplays the importance of laser targeted ranking reports.
I send monthly investor updates that provide an overview on the key areas of the business:
- Customer Acquisition / Marketing
- Customer Usage
- Development Update – milestones, plans
Key Financial/Marketing Metrics: (as a SaaS business)
- Free trial signups
- Free trial conversion rate
- Cost per free trial acquisition
- Paying users
- Conversion rate to paying users
- Cost to acquire a paying user
- Attrition rate
BringShare is digital marketing software that pulls all of your digital marketing data into one convenient place, saving you time and money. Sign up for a free trial of BringShare to get started with your SEO, Email Marketing, Social Media, Paid Search and Website Performance Dashboards. We make it easy to track all of your digital marketing analytics in one place.