How to Reduce the Marketing Cost of Obtaining New Customers

Marketing and Sales FunnelWith the prevalence of content marketing strategies and pay-per-click (PPC) advertising strategies to drive website visitors, and with marketing and sales teams working in greater harmony than ever, the traditional CRM sales funnel can be viewed a combined marketing and sales funnel. In this post, we’ll follow the progression of a lead from the the top of this combined funnel to the bottom of the funnel using a B2B scenario.

Seth Godin, in his typical, masterful way of shedding light on business strategies, explains funnel mathematics in the fourth episode of Earwolf’s Seth Godin’s Startup School podcast. He illustrates how the cost of getting someone to each successive stage in the funnel goes up. While Seth uses B2C examples in this episode, he explains in another episode that most of his examples equally apply to B2B scenarios.

Seth also talks about ways of making a funnel more efficient, or of “short circuiting” a funnel — in order to lower the marketing cost of gaining a new customer.

By looking at your marketing and sales funnel mathematically and factoring in your average profit per new customer, you can determine how much you should spend to attract visitors to your site. But, how can you make a B2B funnel more efficient and thereby lower the marketing cost per new customer? We’ll look at a number of ways in the analysis below.

In addition to having a strategy for organically driving traffic to your site, it may also be worth making PPC a part of your online strategy. PPC also happens to make it easier to illustrate a main component of per customer marketing cost, so we’ll use PPC as the top of funnel “attractant” in the marketing and sales funnel progression.

Of course, there are many other online attractants available to marketers, including SEO, blogging, videos, webinars and social media content – it’s just a little more difficult to quantify the costs of these.

1. Your PPC Ad

The progression starts with creating your PPC ad’s content, and defining the ad’s various settings, including the bid amount for each keyword.

The PPC cost to this point: If the average cost per click for an ad is $4, then the marketing cost of getting someone to your PPC landing page is therefore also $4.

2. PPC Landing Page to Free Offer Conversion Rate

Does your PPC ad link to an optimized PPC landing page?

On your PPC landing page, can your visitor understand what problem you solve in under five seconds? Does your PPC landing page include a free offer that’s “above the fold”? If not, is there a call to action, above the fold, within the PPC landing page that directs to a free offer landing page?

The PPC cost to this point: Let’s assume your PPC landing page does not contain a free offer web form, but that it does have one or more calls to action that link to a free offer landing pages. If the PPC ad cost per click is $4 and 10% of visitors navigate from your PPC landing page to a free offer landing page, then the cost of getting a PPC visitor to your free offer landing page is $4 x 10 = $40.

3. Free Offer Landing Page to Download of Free Asset Conversion Rate

The visitor has arrived at your free offer landing page. Is the destination, free offer landing page efficient as it could be? Is it free of distractions? Even having a top menu on a landing page can be a distraction.

Does the landing page clearly explain the benefits of your free offer? Is there a compelling image that reinforces the offer?

Is the web form on the landing page efficient? Are you asking for too much information on your web form? Do your required fields represent information that a visitor doesn’t mind giving out – or do people abandon in high numbers because one of the required fields is a turn-off? There are many ways to make your B2B landing pages more efficient.

The PPC cost to this point: If 20% of visitors who navigate to the free offer landing page fill in a form, the PPC cost per lead is now $40 x 5 = $200.

4. Download of Free Asset to High Scoring Lead Rate

A visitor downloads a white paper, an ebook or some other free asset. What’s happening to the visitor information? Is this information automatically flowing into your CRM system as a new lead? Or, are leads being inefficiently emailed to multiple salespeople?

If the lead is flowing into your CRM system and form fields are mapped to CRM fields, you can use explicit lead scoring to determine which leads are most likely to become sales qualified.

The PPC cost to this point: If you can immediately disqualify 50% of your leads (overseas, too small a company, too large a company), then your PPC cost per high scoring lead is $200 x 2 = $400.

5. High Scoring Lead to Contact Rate

Based on a high explicit score, a lead seems to a have good potential. Now, a member of your inside sales team starts the process of trying to make contact with the lead. Either a completed phone call or an email exchange count as a “contact”.

The PPC cost to this point: If an inside salesperson can’t get in touch with 20% of your high scoring leads, your PPC cost to establish contact with a lead is $400 x 1.25 = $500.

6. Contact to Inside Sales Qualified Rate

An inside salesperson has established contact with a lead. Was the high lead score a good indicator? Or, did the person say, “We already have a solution, thanks. I was just trying to get more educated. I appreciate the excellent, free content.”

The PPC cost to this point: If 50% of your high scoring leads become inside sales qualified, then the PPC cost per inside sales qualified lead is $500 x 2 = $1,000

7. Inside Sales Qualified to Sales Opportunity Rate

The inside salesperson now excitedly assigns the lead that they qualified to an outside salesperson.

An outside salesperson might not always have the same definition of “qualified” as an inside salesperson, so some of the handed off, inside sales qualified leads are disqualified before long.

The PPC cost to this point: If 50% of inside sales qualified leads never become sales opportunities, the PPC cost per sales opportunity is $1,000 x 2 = $2,000

8. Sales Opportunity to Customer Rate

You have now entered the sales cycle. The outside salesperson will now do all the things that outside salespeople are paid to do: build relationships; establish value; follow up; get other internal resources involved; deliver proposals and more.

The PPC cost to this point: If one in three opportunities become new customers, the PPC cost per new customer is $2,000 x 3 = $6,000.

If the average per new customer profit, excluding PPC costs is $15,000, then the $4 cost per click, which turned into a $6,000 cost per customer, was well worth it. In fact, Seth Godin would likely recommend, based on the math, that you at least double the bid amount for your PPC ad.

The more efficient your sales and marketing funnel, the lower the cost of acquiring a new customer, whether the entry point into the top of the funnel is PPC or it’s any other online marketing component.

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