Which is more costly to attain a new customer or to retain an existing client? This may be obvious too most, that retaining existing clients is significantly less costly than acquiring new ones. With this understanding smart marketers are able to acquire new leads at drastically high prices; but knowing that the back end will pay it forward. As a marketer isn’t the goal is to acquire as many leads as possible for the cheapest price? Just below we are going to dive into Upfront Cost vs. Life Time Value of a Lead.
You Got to Spend Money to Make Money
The Upfront Cost is a term that refers to the amount of capital spent to trigger a specific result. For marketers this result refers to a successful opt-in. However, this result has now bounds it could be based off CPC, Purchases, Engagement, etc. As most marketers know, the goal is to minimize this upfront cost. In order to ensure healthy profit returns.
There are a variety of tactics that can be used to reduce the upfront cost. Some major factors include style of content (photo vs video), audience selections, type of value provided, writing style and many more. When these factors are fined tuned the upfront cost will be drastically diminished. The conversion rates will ensure that the majority of leads that view your landing page will take action. A High converting landing page is a deadly weapon to have in a marketer’s arsenal.
More Marketers Means More Competition…
It is with this fine tuning of all these factors that we are able to get low CPC on platforms such as Facebook. However, this style of marketing is becoming highly competitive. As the number of digital marketers continues to increase the niches will become more competitive. The cost to acquire leads will start to rise. Many of us have already started to see this on Facebook.
What if I told you that there were marketers out there already willing to pay high acquisition cost. They do not stick to the model of lowest cost per result. The method they are implementing is allowing them to dominate niches that are highly competitive. What advantage do they have?
Understanding Life Time Value
The Life Time Value of a Lead is the advantage to have on other markers. How exactly is understanding the average Life Time Value of a Lead an advantage?
When it comes to creating a successful ad campaign, the goal should not be based around the cheapest cost per result. Instead it should be based around the cheapest you can afford to gain a new lead.
But Nathan that doesn’t make any sense? Shouldn’t I want the cheapest cost per result so that I can have a larger profit margin in the long run? Yes this logic is sound. However, as we spoke of earlier the digital marketing realm is exponentially growing. That means everyone is looking to acquire the cheapest CPR as possible. Only making it more competitive to get lower rates. But what if instead of spending $0.50 to gain a new lead, you were willing to pay $5.00!
Well That Just Sounds Ridiculous
However, once the lead is acquired the real marketing begins. As the lead travels through email funnels going through up sells, down sells, products, services and high ticket items. Even if you do have low conversions on all of those items the average LTV would be significantly higher than the cost of acquisition.
With a proper email funnel in place that has good conversions on high-ticket items, some marketers are willing to pay upwards of $50 per new lead! This is because they know that the LTV of each lead is significantly higher than that of acquisition. This model has online marketers crushing the highly competitive niches. The marketers fixated on trying to acquire new leads as cheap as possible will never be able to compete. They will never be “willing” to pay that much for a new lead because they don’t believe in the strength of their back end funnels.
That’s a Wrap
When it comes to having an advantage in a competitive niche. Focus on creating high converting landing pages and with strong writing composition, to ensure that cold leads are quickly converted. Having high converting landing pages mean that you can spend even more on traffic because you will have a higher percentage of success. In addition, your back end email funnel will utilize up sells and high ticket items to increase the Life Time Value of a lead. Thus, letting your cost of acquisition to be significantly higher than other marketers. Allowing you to dominate highly competitive niches. When your marketing machine is up and running fluidly all you will have to do is just pump money into your ads because you know each lead will pay off 10x over their lifetime with you.