marketing by numbers finding the right user acquisition strategy for your business marketing by...
TRANSCRIPT
Marketing by Numbers
Marketing by Numbers
Finding the Right User Acquisition Strategy for
Your Business
Marketing by Numbers
What We’re Going to Talk About
• Strategy NOT Tactics• Understanding the BIG Numbers– LTV– ACAC
• Understanding the Little Numbers– Marketing Funnel Steps– Conversion Rates
• How to put it all together
Marketing by Numbers
BIG Number: LTV
• How to calculate LTV for:– E-commerce Business?– Subscription Business?– Ad-based Business?
Marketing by Numbers
BIG Number: LTV
• E-commerce Business:– Average Order Size– Average Purchases per Year– Average No. of Years as a Customer
• Example:– Amazon.com customer orders 1 book per quarter– 4 books per year– Average price = $12.95– Average Lifetime = 5 Years– LTV = 4 x $12.95 x 5 = $259.00 per Customer
Marketing by Numbers
BIG Number: LTV
• NOTE: Assumptions– New businesses are simply guessing– Try to make educated guesses– But realize they’re guesses nonetheless– Your goal is to test your guesses and be
conservative so as not to run out of cash
Marketing by Numbers
BIG Number: LTV
• Subscription:– Average Subscription Price– Average Renewal Rate
• Example:– Average Subscription Price: $20.00 per Month– Average Renewal Rate: 80%– Average Customer Lifetime: 1/(1-.8) = 5 months– Average Customer LTV: $20 x 5 = $100
Marketing by Numbers
BIG Number: LTV
• Advertising:– Let’s do it together…– What are the main variables we need to plug in
here?
Marketing by Numbers
BIG Number: LTV
• Advertising:– Let’s do it together…– What are the main variables we need to plug in
here?• Monthly Unique Visitors• Pages per Visit• Average CPM Rate• LTV = [(Uniques x Pageviews) / 1000] x CPM
Marketing by Numbers
BIG Number: ACAC
• Allowable Customer Acquisition Cost– What you can PROFITABLY spend to acquire a
customer!– It’s a percentage of your LTV number– Every business has a different percentage!
Marketing by Numbers
BIG Number: ACAC
• Allowable Customer Acquisition Cost– It’s the LAST Number to Calculate:• COGS: 10%• SG&A: 40%• Refunds: 5%• Profit: 25%• Remainder (ACAC): 20%
Marketing by Numbers
BIG Number: ACAC
• NOTE: Pay Attention to Breakeven– You might be able to spend $100 to acquire a
customer– But what if it takes you 4 Years to get that $100
back?– You’ll run out of cash before that happens and
you’ll never get your return on investment
Marketing by Numbers
BIG Numbers Re-cap
• LTV Calculation:– Unique to each business– As a start-up you’re guessing, so make it educated
and make it conservative– Gut check against existing data
• ACAC Calculation– Percentage of LTV– Pay attention to Breakeven
Marketing by Numbers
Little Numbers
• Let’s say…– SaaS Company that has an LTV of $1,000 – ACAC of $250
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Where do people find out about this product?– What happens if they want to give it a try?– How many people end up paying?
• The answers will help you construct your entire marketing funnel
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Where do people find out about this product?– What happens if they want to give it a try?– How many people end up paying?
• The answers will help you construct your entire marketing funnel
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Where do people find out about this product?– What happens if they want to give it a try?– How many people end up paying?
• The answers will help you construct your entire marketing funnel
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Where do people find out about this product?– What happens if they want to give it a try?– How many people end up paying?
• The answers will help you construct your entire marketing funnel
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Paid Search Ads– Convert to Free Trial on Landing Page– Convert to Paid Customer After 30 Days
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Paid Search Ads• CPC• Number of Clicks
– Convert to Free Trial on Landing Page• Number of Visitors• Conversion Rate to Free Trial
– Convert to Paid Customer After 30 Days• Number of Free Trials• Conversion Rate to Paid
Marketing by Numbers
Little Numbers
• Marketing Funnel for SaaS Product:– Based on these assumptions, what does it take to
acquire a customer at our target ACAC?– Break out the Excel Spread Sheets!
Marketing by Numbers
Little Numbers
• Funnel Metrics Do Two Things:– Makes sure everyone is on the same page with
respect to goals– Gives everyone a framework to operate against• Missing a key number? Do you need to tweak your
landing page? Your Google AdWords bid prices? Just look at the dashboard.
Marketing by Numbers
Putting it All Together
• Formal Marketing Plan– Have a specific Volume & Time Goal– Example:• 1,000 Paying Customers by Month 12
– Work backwards to determine monthly, weekly and daily goals
Marketing by Numbers
Putting it All Together
• Formal Marketing Plan– Goal: 1,000 Customers in 12 Months
• Ignoring attrition rates for one second, you can easily see that you’ll need to add 83 new paying customers per month (1,000/12) to hit your goal
• To get 83 paying customers you’ll need 830 Free Trial users (10% Free-to-Paid Conversion)
• To get 830 Free Trial Users you’ll need 8,300 Visitors or Clicks (10% Free Trial Conversion Rate) to your landing page
• At 8,300 clicks per month, you’ll need to spend $12,450 per month (8,300 * $1.50) on Google AdWords – or $149,400 per year
Marketing by Numbers
Putting it All Together
• Now you should be able to answer the following questions:– What is a Customer / User worth to your business?– What can you pay to acquire that customer?– What should your funnel look like (channel selection,
conversion process, etc.)?– How would you optimize your funnel?– What are your business goals?– How much money do you need to hit those goals?
Marketing by Numbers
The End!
Send me feedback, comments questions:
Wayne Mulligan
[email protected]@waynemulligan