Understanding Your Deeper Marketing Metrics
In this page, we’re going to talk about the more in-depth marketing metrics. We’re going to dive deep into the different numbers, the different kinds of data that we can get from your marketing campaign from your marketing activities.
When you can understand what the data is telling you and know exactly what to do next to get better results from your marketing campaign.
We’re going to talk about, in this particular chapter, the two categories of marketing metrics. All marketing metrics fall under one of these two categories.
The first category is what we call conversion metrics. These are metrics that tell us how your overall campaign is performing from a marketing perspective. And how the different stages and pieces of the campaign are performing.
Then we’ve got financial metrics. And this is more about the viability of your campaign. Is this campaign a profitable campaign, a winner, or a loser, from a financial perspective?
Conversion metrics are all about improving, tweaking, enhancing a campaign. Financial metrics are all about the viability of the campaign. Let’s take a look at the conversion metrics. I’m going to break these down for you. Then I’m going to show you these on a marketing map. With your conversion metrics, the very first metric that we have is the opt-in conversion rate.
The opt-in conversion rate is the percentage of individuals who hit the page, hit your lead capture page, and opt-in. If you had 1,000 people that hit that page and 500 people opted in, you’d have a 50% opt-in conversion rate.
What we’re talking about here, the opt-in conversion rate is the lead capture page’s performance.
Then we’ve got the sales conversion rate. This is how many people hit the sales page, the VSL page, the long-form sales letter page, and click over to the order form.
In this context, with the process that I’m going to show you, we’re looking at the sales conversion rate as the percentage of people who click from the sales page over to the order form, not necessarily checking out the sales page the order form.
Then we’ve got the order form conversion rate. This is the percentage of people that hit the order form and complete their checkout. We had 100 people hit the order form, 50 people completed their transaction. That means we have a 50% order form conversion rate.
Next, we’ve got the upsell conversion rate. And just like the prior three, the upsell conversion rate is the percentage of people that hit the upsell page or see the upsell offer and take advantage of it. If you’ve got 50 people that hit the upsell and 25 took advantage of that offer, that means we’ve got a 50% upsell conversion rate.
These are the metrics that we use to improve a campaign’s performance to see which step or stage of a campaign is underperforming. To identify the constraints, so we know what’s going on. Again, these metrics don’t tell us the viability of the campaign.
They don’t tell you whether you’ve got a profitable campaign or a non-profitable campaign. They don’t tell you how much money you’re making or how much money you’re losing. But they do tell you the individual performance of each of these core elements, core pieces of your marketing campaign.
Then, of course, we’ve got the financial metrics. The financial metrics show us, on different levels, on three different levels, whether we’ve got a viable campaign or not, from a financial perspective, from an ROI perspective. And so, we look at three different sets of financial metrics.
The first financial set that we look at is the average visitor value versus the cost per visitor.
The way to look at this average visitor value is, on average, how much is the typical visitor, the average visitor to your marketing campaign, worth to you? You’ll understand how we calculate this.
You’ll see a real example in just a second. But it’s the value to your business, the real dollar value to your business of the average visitor, compared to the cost to generate that visitor.
What did it cost you to generate the visitor?
If you spent $100, and you generated 100 clicks or 100 visitors, that means it cost you a dollar per visitor. There was a cost per visitor of $1. Of course, we want to make sure that the average visitor is worth at least $1, or more, for you to have a financially viable campaign.
The next set is revenue per lead versus cost per lead. And this is, how much is the average lead or opt-in person that completes the lead capture page worth to you? Versus, what does it, or did it cost you to generate that lead? We’re looking at two sides of the equation with these three different sets of metrics.
We’re looking at, what’s the value of a lead, and what does it cost you to get a lead? And we want the value of the lead to be greater than the lead’s cost so that we can have a financially viable campaign.
The third and final set is the average cart value versus cost per acquisition. Average cart value or average order value (AOV) just means the average dollar amount that the average new customer spends with you?
What does the average new customer spend with you through your marketing campaign?
Remember, you might have a bump offer, you might have an upsell, you might have a second upsell.
● Some people are going to take just the main offer.
● Some are going to take the main offer and the bump offer.
● Some are going to take the main offer bump and the first upsell, and so on.
And so, there’s an average value to the average customer.
We want to know what that average value is so that we can compare it to the average cost per acquisition. Cost per acquisition means, how much did it cost you, on average, to acquire a single new customer?
And how much average cart value is that average customer worth to you?
A lot of averages are being thrown around here. So, average cart value, what the typical customer is worth to you, or the average customer is worth to you? And the cost per acquisition is, what did it cost you to generate that new customer?
Let’s look at this example. Let’s start with conversion metrics. We’ve got 1,000 people that hit the lead capture page, the opt-in page. And then we had 500 people that opted in. If we had 1,000 people that hit the page and 500 that entered their details, that means we’ve got a 50% opt-in conversion rate, right?
The lead capture page is performing at a 50% rate.
Now, if we had 500 people hit the sales page and only 50 clicks through from the sales page to the order form, that means we’ve got a 10% sales conversion rate. 50 is 10% of 500.
Then we’ve got 50 people that hit the order form, and 40 people entered their payment details and checked out.
That means we’ve got an 80% order form conversion rate. 40 is 80% of 50. We had 40 people that checked out. 40, in this case, so that you understand, we’ve got 40 new customers. 40 new buyers.
And so, 40 people hit the upsell page, and eight took advantage of the upsell offer. That means we have a 20% upsell conversion rate. 20% of 40 is eight.
These numbers are used to see which stage or step in the marketing campaign is underperforming, which one isn’t performing well. Which one is the constraint, the weak link in the chain, that we need to focus on?
Now, we’ve got the financial metrics. And so, let’s look at how these metrics play out. And so, of course, we need to put in some dollar figures in here. Let’s say we spent $1,500 to get these 1,000 people. We spent $1,500 to get 1,000 people. What that means is that we have a $1.50 cost per visitor.
If you took the $1,500 divided by the 1,000 people, that tells you that it costs you $1.50 per each one of these 1,000 people to get them to your optin page.
The cost of traffic divided by the total number of visitors tells us that we’ve got a $1.50 cost per visitor.
Now, let’s look at leads. We got 500 leads. Remember, we had 1,000 people that hit the page. At 50% are opt-in conversion rate, one thousand people tell us that we’ve 500 opt-ins. We still have the same cost over here. The $1,500 divided by the 500 leads tells us that we’ve got a $3 cost per lead.
It costs us $3 for each of these 500 leads.
Now, we go forward, and we look at the fact that we acquired 40 customers. We acquired 40 customers, and we spent $1,500 to get 40 customers. So, $1,500 divided by the 40 customers tells us that we have a $37.50 cost per acquisition.
That means it costs us $37.50 to acquire each one of these 40 new customers.
Now, is that good, or is that bad? Well, we can’t answer that until we get the other side of the equation. The other side of the equation is the income, the sales, right? Because a $1.50 cost per visitor, $3 cost per lead, $37.50 cost per acquisition might be terrible, or it might be fantastic. It depends on the other side of the equation.
Let’s say that we’re selling a product for $49, and we’ve got an upsell that is $99. If we generated 40 customers, so 40 customers, times the $49 product, tells us that we generated $1,960.
We generated $1,960 from the main offer, but we also had eight of those customers who purchased a $99 upsell.
That means that from the upsell, we generated an additional $792.
To determine or calculate our total sales, we have to take the $1,960 and add it to $792.
And that tells us that we generated a total of $2,752.
Now, before we go on at all, it should be apparent to you that this campaign did well.
We only spent $1,500, and we made back $2,752.
When I have a positive ROI, when we are positive, in terms of return on investment, I will continue to run that campaign no matter what the other metrics say.
No matter what our conversion metrics are, no matter what our other metrics tell us, in terms of cost per acquisition, cost per lead, if I’m getting a positive ROI… In this case, we spent $1,500. We made back $2,752. I’ll do that all day, every single day. If we break this down a little bit more, you could see how these numbers play out.
We’ve got a $1.50 cost per visitor. Well, a visitor, the average visitor is worth $2.75 to us.
How did we come up with that? Well, we take the $2,752 and divide it by 1,000 people. And that tells us that each one of these 1,000 people is worth $2.75.
If we spend anything less than $2.75 to get a visitor into this campaign, we’re going to make money.
Next, we have a $5.50 revenue per lead, right? So, we’ve got the 500 leads. We’ve got $2,752 divided by 500, giving us our $5.50 revenue per lead. Costs us $3 to get a lead. A lead is worth $5.50. Then, finally, we’ve got a $68.80 average cart value.
And so, we take the $2,752. We divided by the 40 customers that we got.
We take the $252 divided by 40, which gives us our average cart value. That means that the average customer that goes through this campaign and buys completes the order form is worth $68.80.
Even though we’re selling a $49 product, because of this upsell over here, the average customer, the average buyer is worth $68.80 to us. Now, I want you to take a hard look at this number right here, average cart value, average order value, or AOV as we call it.
When you are operating at level two of acquisition aggression, meaning break even, your maximum cost per acquisition, the maximum amount of money you should be willing, or can invest in getting a customer is equal to your average cart value.
It’s extremely important that you understand this.
The maximum CPA, the maximum amount of money you can spend to acquire a single customer, must be equal to your average cart value.
This, by having your average cart value, equal your maximum cost per acquisition. This is how you can operate at break even. A maximum CPA equaling average cart value is a breakeven campaign.
This is the way to look at it. The most that you should spend per visitor, per click, when it comes to paid traffic, is equal to your average visitor value. What your average visitor value tells you the maximum amount that you should be willing to spend to get a visitor to get a click.
The most that you should be willing to spend per lead, per opt-in, per individual that hits your lead capture page and enters their information, in this case, is the revenue per lead—the $5.50.
As long as you spend $5.50 or less to get a lead in this campaign, you are going to make money.
Finally, the most that you should spend to acquire a new customer, a single new customer, is $68.80. If you spend $68.80, you are operating at break even.
You’re acquiring new customers for free, building your database for free, and you are pumping people into the backend. And so, now, you understand the more in-depth metrics.
With these metrics, you don’t need to know anything else.
With what we just covered in this chapter; you could understand everything taking place within any direct response marketing campaign.
From a conversion, you know from a performance perspective how the campaign performs and how to identify the constraint.
And you understand how to use the financial metrics to know whether you have a viable campaign or not. And how to identify how much you should spend per visitor, per click, per lead, as well as per new customer.