CPL, CPS, ATV, ROI

WTF?

You might recall that in last month’s article I mentioned lawyers in America who are prepared to pay up to $1000 per click in their search for people who want to pursue a legal action because they have suffered from the effects of asbestos in the workplace.

I still come across business owners who can’t decide whether £1 per click is too much.

What’s the difference between the lawyer and the business owner?

The lawyer knows his numbers. He knows how many leads he needs to get legitimate enquiries. He knows how many genuine enquiries are required to get a meeting and he also knows how many meetings are required, on average to get a paying client, and of course with favourable individual claim settlements of more than $1M, how many paying clients are required for the lawyer to live the lifestyle he wants.

For those of you who were at the last National Event or who had the opportunity to watch the video rerun – this is precisely what Nigel was talking about in his final Keynote presentation – Knowing Your Numbers.

I’m often asked, “How much should my AdWords budget be?” Well, if you’re just starting out start low to establish a position in the auction. See the first few months as experimentation and put the cost down to development or training. However, once you find out what works then why limit yourself with a defined budget.?

Think of it this way – if you were to give me a  £1 coin and I gave you a £5 note in return, would you want to give me another pound? I guess you would? But what if you said “I’m happy to keep giving David a pound but I have a daily limit on what I’m going to give him – and that’s £10”.

So, you’ve given me ten £1 coins, and for each £1 coin, I’ve given you a £5 note back. You’re making £4 on each deal and by the time your budget is exhausted you are £40 better off. Isn’t it a bit daft though that you’ve set your daily budget at £10? I know you’ll be back tomorrow with another £10 and we’ll do the same exercise over again. But what if you abandoned the idea of your daily budget and just kept on giving me £1 all day long?

This all sounds a bit daft, I know, but it’s what’s happening in millions of AdWords accounts around the world. And the reason it’s happening? – because people just don’t know their numbers – they guess at them.

I find it interesting that everyone, even Google, fixates on impressions (when your ad is served by Google) and clicks (when someone clicks on your ad and is taken to your website). You see, impressions and clicks count for nothing. What’s essential is someone taking the action you want them to take on your website. Buy, download etc., This is what’s known as a conversion. Your visitor has converted from a visitor to a purchaser or downloader of your content.

Conversions can be set up and measured in the AdWords platform and also in Google Analytics. Trouble is most advertisers don’t know how to set this up and when they do most are set up incorrectly.

At the Scottish Shutter Company, we wanted to be certain that we had a complete and accurate picture of every lead we generated. Not only that we also wanted to know what happened to these leads as they progressed through our funnel and also how much a lead cost us and how much a sale cost us.

We also wanted to know how much revenue we generate from AdWords and Facebook advertising respectively. That way we would know if we spent £1 on AdWords or Facebook exactly how much did we get back and over what time frame.

We already had Infusionsoft which Pieter de Villiers had turned into an awesome machine that not only serves as our CRM system – it runs the business. The staff runs the system.

So, it seemed logical that our quest to understand our numbers should start with the information held in Infusionsoft. What we needed was a fully dynamic system that presented all the numbers in real-time so that the directors and staff could make strategic decisions. And so, The Dashboard was born. I’ll let Pieter take up the story….

We created MetricsLab as a WordPress plugin, to give the directors at SSC and our clients the ability to see their key numbers on a single screen, updated automatically, without the need to dig around in reports and spreadsheets.

The key data we track comes from Infusionsoft, Facebook Ads and AdWords.

For AdWords and Facebook we simply connect to the account and pull in the total ad spend for the selected date range. This information is automatically updated every morning.

Tracking conversions is entirely based on Opt-ins recorded in Infusionsoft. The key here is to actually use Infusionsoft to manage your processes. You need the data in order to track it.

The key steps in the SSC sales process we track: Leads, Enquiries, Measures, Estimates, Sales and Order Value.

This allows us to track every contact as they go through the process, and feed the information into the dashboard. The information is displayed in date ranges, on a monthly basis. This gives us the option to see exactly what happened to the leads generated in say, September, and exactly what happened to those leads both within the month of September and over time.

In addition to this, we are able to track the conversion rate for every stage. We know the conversion rate from leads to enquiries, enquiries to measures and measures to order.

This gives us key points to focus on when working to increase sales.

In addition to this, we also track the Cost Per Lead (CPL), Cost Per Sale (CPS) and Average Transaction Value (ATV). Combining this with the In-month ROI (Return On Investment). If we spend £1 on AdWords in September, how much of our £1 do we get back within the month of September and the overall ROI on the September leads to date.

This makes it very clear what can be spent to get a lead, as we know how long it takes to get that money back. At the moment, we break even on total ad spend at the end of the second week of the month. That means, if we were to spend £6000 in the month of September, we made that £6000 back by the end of the second week of September.

By tracking leads over a minimum of 12 months after they enter the system, we also know that on average, very little happens to leads more than 2 months after first opting in. Therefore, we need to add them to a specific re-marketing campaign after 2 months, if they have not purchased within the first two months.

Knowing your numbers like this, at a glance, allows you to make decisions based on data and facts, not gut feel and fantasy. It also highlights where you need to improve your systems and processes to increase conversion rates. “Not enough leads” is not always where the problem lies.

Pieter K de Villiers

Author: Pieter K de Villiers

Pieter K de Villiers is slightly obsessed with systems. The systems and process automation he builds for small businesses are transformative, to say the least. Pieter is a Co-Founder of Barefoot Digital and the Amazon best-selling author of “Barefoot Business: 3 key systems to attract more leads, win more sales and delight more customers without your business killing you”.