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Do You Know How Valuable Your Leads Really Are?

by | Nov 1, 2018 | General

CPAI want to tell you a quick story about a test campaign I was running.

It was a new campaign for this particular organization – an in-stream video campaign on YouTube.

And a 2-step campaign (a pure lead generation campaign) at that.

Not all leads are created equal

Our expectations were limited. The cost-per-leads (CPLs) were running high.

So high, that I was apologizing in advance for the performance, and busting my ass trying to find areas of opportunity to bring down costs.

Eventually, I managed to bring the CPLs down from $8.00 to $4.00, but this was still above where my client wanted to be.

I was prepping for our monthly reporting meeting, getting ready to face the music.

And then my jaw dropped.

When we looked closer, we saw a Lifetime Value ROI of 183%, well above expectations, well above benchmarks, and higher than almost any other campaign they were running.

Our sales cost-per-acquisition (CPA) was $187, again, an order of magnitude lower than most other campaigns.

I did an immediate about face and recommended we start optimizing our CPLs back UP.

We had optimized CPLs so low, that our volume had fallen off the cliff. I had been ready to call the test a failure based on existing KPI benchmarks.

Without bringing the CPLs back up, we were leaving money on the table.

What would have happened if I hadn’t looked beyond my traditional metric (those CPLs) to get the bigger picture?

Dig Deeper

It’s so easy when we’re in the weeds, to not look beyond the benchmarks and really dig into the overall business impact.

But this was a timely reminder to look beyond the quick metrics and look at the full picture.

It can be worth it to pay $3 for a lead.

It can also be worth it to even pay $15 for a lead. Or more.

The end-goal isn’t the lead, or even the cost you paid for the lead. The importance is the value they bring to your organization.

At the end of the day, we’re looking to move the needle on new customer acquisition.

This is an easy proposition for 1-step campaigns. They bring in immediate revenue. Immediate ROI.

We spend hours each day looking at data. It’s one of the biggest benefits of working in marketing at The Agora Companies.

But it’s harder with 2-step campaigns. We set up these benchmarks to make our lives easier.

We’re very lucky to have a very data-rich environment that allows us to really tie 2-step campaigns to deeper business goals.

So while we want to use benchmarks as a stop-gap for 2-step campaign analysis, we can take that one step further.

One of the ways we can do that is to throw our assumptions about how things should work and replace them with an understanding of how they are getting us customers and if we’re leaving money on the table.

Not all leads are created equal.

It all comes down to allowable acquisition cost. The basic principle of allowable acquisition cost is that the higher your customer lifetime value, the more you can spend to acquire that customer.

If you want a more in-depth discussion of allowable acquisition cost, take a read through this article on customer acquisition cost by Neil Patel.

We have the data.

It’s up to us to use the data we have to understand how and when to be flexible when spending our marketing dollars.

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