“Show me the money!” In one form or another, this film declaration has become the de facto response to any new or unusual marketing gambit. Cro Metrics does exactly that: shows you the money. Let me explain.

In my consulting practice, Cro Metrics, we focus on getting people who come to your website to take the desired action, such as buy, sign up, etc. Clients often spend huge amounts of money to bring traffic to the site in the first place, but then do not spend the money to lead the end user into actually taking the desired action. You need site visitors to act accordingly, or your marketing dollars are wasted.

Cro Metrics looks to partner with companies that offer paid acquisition, for the simple reason that the more traffic coming into the site, the more opportunities we have to convert visitors to customers, the more successful our client becomes, and therefore the faster the business grows. In other words, everybody sees the money.

What exactly is “paid acquisition”? It generally boils down to several specific channels:

  • Google Adwords: these are the ads you typically see on the right-hand side of the screen when you search for something on Google.
  • Facebook ads: ads usually located in the middle of the news feed, though sometimes also on the right margin.
  • Display ads: large, rectangular “display” images that act as portals to the advertiser’s site once you mouse-over or click on them. They usually grace the top of a page.

Here’s how paid acquisition works:

  • Let’s say you’re breaking even on your ad buy now with $1 per click, 1% of the clicks buy, and a $200 average sale at 50% margins.
  • Now, suppose a conversion optimization business such as Cro Metrics comes along and boosts your ad conversion rate 50%.
  • You’re now earning $33 on that same sale, because your cost has dropped to $66.67, and you can choose to either make money on the sale or keep profit at zero and continue to grow.
  • Because you’ll make money on subsequent sales, you can increase your cost-per-click to $1.50 and break even with the new conversion rate.
  • There should be a lot more advertising opportunities at $1.50 than at $1, so your company can accelerate its growth curve.

However, a remarkable number of companies are not taking advantage of paid acquisition, and over the years we’ve come to realize why:

  • CRO (conversion rate optimization) introduces another variable into the mix that could disrupt the paid acquisition person’s business (often outsourced).
  • There is not sufficient tracking in place.
  • CRO is a specific discipline, and no one in the marketing or paid acquisition firm has enough expertise to be able to do it properly.
  • The engineering team is concerned that tests running on the site could somehow create problems.

An additional “gotcha” we’ve seen that is specific to SaaS or lead generation businesses is assuming that all leads convert at the same rate. Because tracking on a per-acquisition channel basis is relatively difficult to do, this is a frequent assumption. We’ve dug into the numbers on a couple of different cases and uncovered a ten times or greater difference in conversion rate, depending on the marketing channel. So while the spend could be equal between Google and Facebook because the cost per lead is the same, the cost per conversion could easily make one channel massively more profitable.

Company A: Focused on conversion optimization
Company B: Not focused on conversion optimization

A B
Cost per click $1 $1
Click to Trial Conversion Rate 7% 5%
Trial to Paid Conversion Rate 15% 7%
Overall Click to Paid Conversion Rate 1.05% 0.35%
Customer Acquisition Cost $95.24 $285.71
Customer Lifetime Value $200 $200
Profit $104.76 ($85.71)
Reasonable increases in conversion rate results in massive profit increase

 

Based on the gains we’ve seen with our clients, not doing CRO is rapidly becoming a major disadvantage. The companies that are doing CRO will often have a 50% to 100% cost per acquisition advantage over a company that isn’t, allowing the company that is using CRO to dominate the market. Particularly with paid search, because of the way the positioning of the ad auctions work, this could translate into a five-fold jump in revenue, or make the difference between business success and failure.

Bonus: paid acquisition is much less convoluted than Jerry Maguire’s path to success.

If you’re spending money on paid customer acquisition and not doing CRO, we’d like to show you the money. Give us a call: 415-505-7625. Or email: chris@crometrics.com