As my mentor always says…
“It’s not who outspends you who acquires a customer, it’s how they outspent you that wins…”
You can spend and spend and not even acquire a single customer. So it is important to understand how that traffic was bought and to measure it. We’ll be discussing traffic in other articles.
Each of these “high-impact” metrics that we’re going to chat about today do exactly this: they tell you, down to the penny, how much you can spend to acquire a single customer.
Learning these simple but critical metrics will allow you to dominate your market without breaking the wallet.
And since getting into Metrics, lets just get to the most critical one right out of the gate:
Metric 1 – LCR – Lead Conversion Rate
We know we should be tracking the number of new leads.
But there is a component to this that is much more important, and that is Lead Conversion Rate.
LCR is the rate at which your leads convert into paying customers.
Why Is This So Important?
So lets say you get 100 leads per day. Of those new leads the conversion rate is 10%. Thus, you’re getting 10 new customers a day.
However, your competitor is getting half the amount of your leads, 50 per day, but he has a 30% LCR.
In this scenario, your competitor is getting 15 news sales per day and is probably spending less on advertising because they had half the amount of leads come in.
So that’s why it’s important to spend wisely.
By increasing your LCR, your profits will grow dramatically. Imagine, your advertising costs remain the asme while your revenue grows.
What this means is now you can spend more to acquire MORE customers!
Show Me The Conversion
The LCR formula is:
Number of Sales / Number of Leads
Review your processes and funnel AFTER you capture your lead.
- Did you make an immediate offer? (We offer a detailed guide for CVO (customer value optimization)
- Do you have an effective followup? (email marketing)
Metric 2 – CM – Contribution Margin
Next up on the list, CM!
This metric is arguably the most important metric for tracking as a digital marketer.
Contribution Margin is actually an accounting metric that equals:
Sales – Variable Costs
Here are some examples of these variable costs:
- Advertising Costs
- Costs of Goods Sold (how much did you buy the initial product for)
- Affiliate Commissions
- Sales Commissions
How Does It Look?
Lets say you’re selling educational DVD’s (yes, plenty of people still do). Here, the formula would equal your sales minus the cost of:
- fees pad to any affiliates (people selling on your behalf)
- any advertising costs incurred
- sales commissions
Here is an example chart of CM:
Why Is It So Important?
As a digital marketer it is very easy today to increase your advertising expenses, such as Facebook for example, and see your sales sky rocket. Or, you can get more affiliates to promote your product more by offering high commissions.
The issue that is that taking this kind of action often decreases your CM (and profits) even though your sales increased. In other words, you spent more to get those sales than the total dollar amount of those new sales brought in.
Make sure you are not adding less profitable sales when improving your Contribution Margin.
Returning to Facebook, if the commissions you’re paying or the advertising costs you’re paying for each new sale are too high, your CM will probably decline (or increase only slightly).
Metric 3 – EPC – Earnings Per Click
Sometimes known as Revenue per Visitor
This is my favorite.
It’s an easy enough formula…
Your EPC number paints a picture of how well your products will convert to sales and clearly states the worth of a click, both of which can be great incentive for your affiliates to keep actively promoting you to their contacts and customers.
Here’s a potential real-world example for a three-month period:
- Product Price: $800
- Total Products Sold After Refunds: 75
- Affiliate Gets $40 for each sale (5% Commission)
- Total Clicks on Affiliate’s Site: 2,000
EPC = $3,000 ($40 Net Commission X 75 sales) ÷ 2,000 (Total Affiliate Clicks) = $1.50
So in this scenario, the Earnings Per Click is $1.50, meaning your affiliates will receive $1.50 for every click of the ad you placed on their websites. In this case, they can expect $3,000 ($1.50 x 2,000 clicks). Earning $1,000 a month for promoting a product from the comfort of an office isn’t too shabby!
If you’d like to learn more about how to be an affiliate for the top home business system, make sure to click here!
It’s All In The Numbers…
Start tracking these metrics and use them to build your business that is willing to spend more and able to spend more, on acquiring more customers.
Have a question? Comment? Willing to Share? Leave it in the comments below!