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 = $ 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 Marketing by Numbers