The Leaky Bucket: Leadgen & Customer Churn (Part 1)
Buckets Full of Leads:
It’s noon in NYC at a fancy magazine company. One of the employees compiles the most recent list of subscribers. Across the country, an LA agency worker downloads a CSV with some of the names. She mail merges, sends art files to a vendor, and in Pennsylvania, junk mail with your name on it rolls off a printing press.
A Denver Nuggets fan posts an angry comment on Facebook, under a story about the team’s latest trade. Facebook’s adbots note his high level of activity, scan through demographic and behavioral info, and realize that he’s a great target for ads about the new Ford F150. He gets served an ad, and retargeted ads 5 times over the next week. Then he clicks and watches a short video about the pickup truck. Facebook charges Ford’s ad agency account 80¢.
This is how advertisers find your data, how they do targeted advertising, and how brands generate leads and new customers. In the pre-digital era, options for this were limited. Your home address, your phone number, and your mail order habits were really the things that could be captured, modeled, and sold.
Now? There are dozens of data points that get captured — in part due to the tiny computers we carry around in our pockets. Your views on a page, your search terms on Google, your social media activity, your physical presence in some stores, your streaming video habits on your Playstation. These give advertisers (and the brands buying your data) information about you.
Money that used to go to TV commercials and local newspapers can now be much more targeted, and these specialized advertisers can charge a good amount for your information. Google makes enough money off of advertising alongside your search results that it is the LARGEST MEDIA COMPANY in the world, with Facebook at a #2.
Brands use this data to spend targeted $$ to get in front of your eyeballs. Some percentage of people who see the ads buy the product or service. And companies always need to keep spending, because they’re adding customers to a leaky bucket. Some people stop buying. Some give their info, but never buy. It’s like the law of gravity in business.
These companies might be trying to acquire leads, contact info for personalized follow up in a sales funnel. They might be trying to acquire customers directly for single purchases. Or possibly for the best subscription program known to man. No matter how they defined a conversion — the bucket will ALWAYS be leaky. Whether you’re printing a newspaper ad or sending push notifications. How the product and marketing team reacts to that will make or break the business.
Why try so hard if it’s always leaking?
You and I both know that customers are worth more than the first purchase they make. Depending on what you’re selling, a customer could be worth several repeat transactions, a short term subscription, or a long-term contract. We covered this in the post about Long Term Value. Acquiring customers is fundamentally a long term play.
If it costs $15 on average to bring a new customer in through Google Adwords, and that customer spends $300 over a lifetime — it’s a great deal. It might even make sense to spend more, and go “wider” with your net. That way you could bring in as many $300 customers as possible. Keeping your audience for ads at a $15 “cost per acquisition” means you might be leaving money/customers on the table.
How wide do you cast that net — and what metrics are important? In addition to covering that in the LTV post, we also need to forecast, pulse-check , and measure after the fact. Did our spend bring in enough customers or leads at the recommended rate? If we expected $20,000 in Adwords to bring in 1.3K new users ($15 CPA) and instead it brought in 800 ($25 CPA) we should adjust our forecast or plans for the future. (See my “math for marketers” post for some suggestions).
What does it mean to ‘fill’ the bucket?
I keep mentioning adwords, but there are plenty of targeted ways to bring in leadgen.
- Pay per click or display ads (Adwords, Facebook, Bing, a few others)
- Affiliate marketing (content postings, coupons, or other relationships that funnel valid traffic in, for a commission or product)
- Direct mail lists: Behavioral (A magazine, list vendor or other marketer sends a list of something like “GQ subscribers” or “Conde Nast Ethnic Masterfile.” These people have purchased or ordered something)
- Direct mail lists: Modeled (A data pool of ‘lookalikes’, or names scraped out of a massive pool that fits a model/curve)
- Targeted prospecting (depending on the product and other data sources)
There’s indirect, often free ways too.
- Content: written, video, or organically posted social content
- Word of mouth or referrals: Happy customers (esp if you incentivize them w something) like to talk about their favorite things.
- Multiple storefronts/channels. If it’s a physical product, can you get on Amazon as well? Does adding an Etsy storefront to your homegrown Squarespace presence bring in new discovery?
People might throw a coupon into any of these channels, or post great photos/videos, or have a general sale or other promotion. You know, marketing. That stuff. Any of these channels can be “how the bucket gets filled.”
That’s it for now. Next post, we’ll cover two things:
“What are the leaks?” and “What can I do about them?”
Coming soon, to a feed near you.
Speaking of feed…today’s food pic
