Trading Places – A tale of 2 Ad Campaigns
It’s very, very rare for a business to share data of this detail, so listen up, you might not get another shot like this for a long time.
I call it the funnel fallacy.
It;’s the belief that if you can just shove more traffic in at the top of the funnel, then the bottom end – sales – will grow as well.
It’s a specific example of the McNamara Fallacy, where you believe that because something is hard to measure, it’s not important.
It gets it’s name from one of the reasons the US lost the Vietnam War. It’s kind of a big deal.
Here are the numbers. I’m going to pick out, line by line what I’m paying attention to between these campaigns:
I’m actually going to ignore this as without knowing the targeting and seeing the landing page, we’re in no real position to judge.
I’m sure the copywriters will have at it though.
I’ll do some maths then loop back to this.
Work out the ClickThrough Rate (CTR)
<= 0.5% on the left
=> 0.7% on the right
Normally an ad with higher CTR gets shown more often – it earnsmore for the ad network, so maybe there is a budget that has been eaten up here.
4) Cost per Click
Yes $25 PER CLICK
We’re playing n the big leagues here.
If your target is CMO’s in highly data-driven businesses, these guys are spending millions on tech, and you’re competing with some big players.
Look at the sales line later though, the rewards can be huge.
At this point, people who don’t have a grip on the numbers will go to the left, but hold on…
Still winning on the left. Those cheaper clicks are giving us way more leads for our budget.
This is where tracking sales all the way through to your CRM pays off though.
6) MQL = Marketing qualified leads.
Short version, too many leads on the left are trash.
Cheap leads ≠ Good leads
This is a major hurdle for small companies. Their Google analytics shows them the lead volumes coming in, but without having that data in their CRM tools, they have no idea which leads came from where.
Once your marketing guys have looked at them, maybe even made the first contact, the game changes altogether.
7, 8, 9) All the way down the pipeline our “expensive” leads are winning, but big margins too.
This isn’t a one-off scenario. There’s almost a law to this that pushing too hard on the front end for lead volumes ends up with bad leads.
If you want cheap clicks and leads, the ad networks will give them to you, but they’ll save the buyers for the people who are tracking all the way through to sales.
It’s like a see-saw. You push up the lead volume and the sales go down. Conversely, the more focussed you are on looking for buyers, and understanding the flags that identify them, the more sales go up.
The real players will measure those sales over years, allowing them to go deep into the red on customer acquisition, knowing exactly how long they need to make the money back.
Are you ready to scale?
One of our criteria for working with a company on their funnel is that they have this depth of tracking set up already, or are prepared to invest to get it done.
It’s the biggest reason we turn people away as potential clients. We don’t care if you don’t have the technical skills – we can fix that.
What we care about is whether you’re prepared to be challenged on the idea that any metric is more important to pursue than absolute gross margin.
Businesses that think that concentrating on the top of the funnel is enough almost always come back and bitch about the leads not converting further down the line.
If you think that you “just need leads, we can convert anyone once we get them on the phone” then I’m sorry, but you’re not ready for us yet.
If you’re looking at the numbers thinking “well this all makes perfect sense, but how do I do it?”, then we should really be starting a conversation.
I hope this gives an idea of how a well-oiled business actually judges a campaign, and an idea of the numbers you need to be tracking.