I’ve got something I’m excited to share with you today. The “idea” behind this has really helped my advertising over the past few years. Not only in scaling and keeping things organized, but also in dealing with “advertising anxiety”, something we all get. Keep reading or watch the video below…
Have you ever asked yourself where that advertising anxiety comes from? Most people just accept it as part of the business and move on. It’s akin to a stage performer getting cold feet before they go on stage. For lots of performers, it doesn’t matter if it’s your first show or your 100th, they still get it.
So where does this ad anxiety come from? Well, usually it’s from lack of confidence in the numbers you’re seeing. By not having a “baseline” to compare things with, you don’t know if your advertising is working UNLESS you get a conversion (sale, appointment, etc).
The odds of getting a sale or conversion “right out of the gate” are very very low.
So the novice advertiser runs his ads, doesn’t see a result after the first few days, makes the conclusion that this campaign doesn’t work, shuts it off and goes back to the drawing board.
He tweaks the headline, the offer, the follow up, everything. He spends the next week changing it all.
He gets his new set of ads up. They run for 3 days. No sales. Same result. He shuts them down.
While all this is happening doubt is starting to creep in and he starts to believe that maybe this advertising stuff doesn’t work. Or maybe my product isn’t any good. Maybe this advertising just doesn’t work.
Or worse yet… “I Quit!”.
What this poor advertiser doesn’t understand though is that odds are… his funnel was actually working the way it was supposed to! His ads were probably performing just fine! But even if they weren’t, there was NO NEED to trash the entire funnel and start over again.
If our advertising friend here just was able to pinpoint what parts of his funnel weren't working, he could fix those rather than scrap the whole thing.
And that brings us to todays topic. KPI’s and “funnel steps”.
When most people look at a sales funnel they look at it as 1 individual item.
But that couldn’t be farther from the truth. A sales funnel is a combination of marketing methods that lead a customer to an end goal.
If one of those steps are broken, everything after it doesn’t work.
It’s kind of like if you’ve got a hose and you’re watering your garden. If someone drives over the hose or parks on it, you’re not going to get any water out. If part of your funnel is broken or not up to snuff, then leads and sales won’t come out.
So how do we fix a broken sales funnel?
You look at things in a linear process. Find out what isn’t working and fix it to “open up the funnel” again.
In order to do that, we need to identify the different steps in a funnel and assign them numerical values that we can track.
Sounds complicated but it’s actually pretty simple.
If you can figure out what your “baseline” numbers are that you need to hit at each step of the funnel, you can pinpoint exactly what is wrong, and know exactly what you need to do to fix it.
Here’s How To Figure Out Your Sales #’s.
Step 1 – How much does your product or service cost (or what is the LTV of your customer). Ex: My customer is worth $100
Step 2 – How much profit do you want to make? I want to double my money. Ex: Spend $1 to make $2)
Step 3 – How much can you spend to acquire a customer if you want to double your money? In this example: $50
So the means I can spend up to $50 to get a customer worth $100 if I want to double my money.
With me so far?
Step 4 – Let’s work backwards from there.
To double our money we can’t spend more than $50 to acquire a sale.
Ask around and find out what the average conversion rate is for a product like yours at your price point from cold traffic.
Let’s take a guess and say that it’s around 1% – every 1 out of 100 customers that visits will buy.
That means I need to spend less than $50 to get those 100 people to visit my page.
Which means I can’t spend more than $0.50 / click
So the numbers break down like this:
The most you can spend on a click: $0.50
Minimum conversion rate required: 1%
And even though this is about as simple of a “sales funnel” as you can get, the principal still applies. If you’re getting traffic for less than $0.50 and you’re not profitable, your ads are great but your page needs work. If you’re getting traffic for more than $0.50 and your conversion rate is above 1%, your ads need work.
So by having a “baseline” to compare things against you’re able to see whether you’re on track to hit your goals.
If everything lines up and is “within KPI”, then you’ll hit your goal of doubling your money.
You’re essentially building a roadmap showing you how to get to your destination and what needs to be fixed next in order to get there.
I hope you enjoyed this little tip. If you did, make sure to leave a comment below.
Cheers & chat soon
– Adam Nolan