Search University 2013: How Much can I Pay for a New Prospect or Customer per Order?

P0
SEARCH UNIVERSITY 2013
How Much can I Pay for
a New Prospect or
Customer per Order?
Hubert de Cartier – Universem
10h00 – 10h30

P1
 Co-Founder of Universem
 A big passion for Digital Marketing
 … and Web Analytics
About me …

P2
51 millions websites added in 2012
Source: Internet 2012 in numbers, Pingdom

P3
71% of businesses plan to increase
digital marketing budgets this year
Source: 71% of businesses plan to increase digital marketing budgets this year: report
Econsultancy, 2013

P4
 Determine maximum Cost Per Acquisition
(CPA) for 3 cases:
 A lead generation website
 An e-commerce website
 A SAAS business
Overview

P5
Solar4You: lead generation case

P6
 Average solar panel installation: 25,000 €
 Margin on each installation: 10%
 2,500 € for a new contract
 One contact/prospect on twenty leads to
a contract (Offline conversion rate)
125 € for a new prospect

P7
 125 € per prospect: key information
for running AdWords campaigns!
 Use it for your conversion values and
calculate easily your ROI
 If you have a 3% online conversion rate on,
you can bid up to:
Maximum CPC = 125€ * 3% = 3,75 €

P8
 The Traffic Estimator by Google Adwords

P9

P10

P11
 On a monthly basis:
Around 700 clicks
Around 20 leads
Around 1 solar panel installation sold!

P12
 Summary:
Average customer value
* Average margin
* Online conversion rate
* Offline conversion rate
--------------------------------
= Maximum cost for a visit
NB: we consider all visits with same quality

P13
Bioticas: e-commerce case

P14
 Average order size: 80€ (excl. VAT)
 Margin on each order: 15%
 12 € margin per order
 Online Conversion rate: 3%
Maximum 0,36 € per visit

P15
 Traffic estimator
 Magnesium pills against stress
 Several keywords in France, Belgium
& Luxemburg around anti-stress topic

P16
What if we could bid more?

P17
 Consider Lifetime Value:
Customer 1
Customer 2
Customer 3
Y0 Y1 Y2
Y0 Y1 Y2
Y0 Y1 Y2
 1,66 order per customer on a period of 2 years! (+66%)

P18
 Consider Word of Mouth
 On average, 10 new customers lead to one more customer (+10%)

P19
 We can consider a new customer
value as high as
Average order size: 80€
* Lifetime Value: 1,66
* Word of mouth: 1,10
--------------------------
= Total Customer Value: 146,08€

P20
 Average order size: 80€ (excl. VAT)
Total customer value: 146,08€
 Margin on each customer: 15%
 21,91 € margin per customer (12€)
 Conversion rate on the website: 3%
Maximum 0,66 € per visit (0,36€)

P21
Bidding more leads to more clicks
+82% CPC max, +105% clicks

P22
 Summary:
 Focusing only on one order can lead to
missed opportunities
 Post sales promotion are important to
increase Lifetime Value
 Customers’ data are essential for success

P23
Mailjet: SAAS business case

P24
 Software As A Service – SAAS characteristics for
Mailjet:
 Monthly recurring revenues
 Freemium model
 High growth
 3 currencies and 4 languages
Reminder: all data are only there for illustration

P25
 From a visit to a good customer: many steps!
1. Lots of visits
2. Freemium users  Signed up on Mailjet
3. Active users  Sent at least one email
4. First time paying users
5. Holy Grail: Recurring customers  !
10%
50%
30%
70%

P26
 The conversion funnel:
10%
50%
30%
70%
Visits
Freemium users
Active users
First time
customers
Recurring
customers
1000
100
50
15
10,5

P27
 Defining your maximum CPA, parameters:
 Monthly Recurring Revenues (MRR): 50€
 Gross margin: 75%
 Churn rate: 3% as opposed to retention rate (97%)

P28
 Example of a cohort analysis for Mailjet

P29
Lifetime value = MRR * Gross margin *
1
Churn rate
Lifetime value = 50€ * 75% *
= 1250€
A customer uses Mailjet 33,33 months on average
1
3%

P30
 Two key guidelines for SAAS startups:
Lifetime value > 3* CPA
Months to recover CPA < 12 months
 Max CPA for Mailjet = 417€
Inspired by http://www.forentrepreneurs.com/saas-metrics/

P31
 With a global conversion rate of 1%, you should
pay less than 4,17€ for each visit on Mailjet.com
 But conversion rates are varying hugely
depending on:
 Traffic source
 Location
 Awareness of your product in the market
 Timing
 …

P32

P33
CPA and CPC calculation tool
http://toolbox.universem.be

P34
1. Determine how much you can pay for a new
customer/prospect
2. Measure and calculate your ROI with simple
maths depending on your business model
3. Take actions and enlarge your horizon to find
great ideas for your business while always
using data to confirm your new initiatives.
Conclusions

P35
Contact me at
contact@universem.be
http://www.universem.be
@Universem
http://www.facebook.com/Universem
Thanks for listening!

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Search University 2013: How Much can I Pay for a New Prospect or Customer per Order?