How can brands use online advertising to acquire new customers? In this presentation, we'll discuss key metrics like COCA, LTV, and ROI, plus how to choose the right channel for your product or service. *Originally used for a class at Startup Institute

1. What we will be going over
• Intro to customer acquisition
• Key Metrics
• COCA
• LTV
• ROI
• Choosing the right Channel

2. Intro to customer acquisition
• Marketing: Customer Acquisition
• Free (ish)
• Organic search
• Inbound Referrals
• Word of mouth
• PR
• Paid
• Online Ads
• Offline Ads (newspaper, TV, Radio, magazines)
• Direct Mail
• Sales- Turn leads into sales (only used for some products)

3. What are you trying to accomplish?
• Direct sales
• Customers go online, see an ad, go to your site, buy a product
• Customers sign up for a free trial with path to revenue later
• Indirect sales
• Leads: Customers give phone #/email, then do a sales call
• Trials: Customers sign up online to trial something in the real world
• Email list signup: Customers sign up for emails
• Customers become regular readers of your site, then buy something later

4. Match the goal to the product
• Tie of the month club- $25/month
• Online SAT tutoring: $1K/3 months, unknown brand
• Sell a Ferrari: $200K one time sale
• Dropbox

5. What we will be going over
• Intro to customer acquisition
• Key Metrics
• COCA
• LTV
• ROI
• Choosing the right Channel

6. Cost of Customer Acquisition (COCA)
Steps in the funnel:
• Impressions
• Priced as CPM = “Cost per 1,000 impressions”
• Determined by
• Who the audience is
• Ad platform
• Ad type (newsfeed vs sidebar, etc)
• Clicks
• Click through rate x cost per impression = cost per click
• Determined by:
• Quality of ad
• Match of ad to audience
• Post click conversion
• Cost per click x conversion rate = cost per acquisition
• Determined by
• Quality of site
• Type of action required (signup for email list vs buy a Ferrari online)
• Match of audience to site
• Post conversion sales
• Some products require post-conversions sales step
• COCA = (CPM/1000) x (1/click through rate) x (1/conversion rate) x (1/post
conversion sales rate)
Impressions
Clicks
Convert once on
site
CTR
Conversion
Rate

7. How to minimize COCA
• Buy as few impressions as necessary
• Only show ads to people with a high likelihood of buying
• Get a lot of clicks
• High quality ads well matched to channel
• Find the audience most likely to click
• Get post click conversion
• Have great landing pages
• Different audiences will have different conversion rates
• Have as few steps as necessary

8. Great Landing Pages
• Your home page is NOT a landing page
• You may need a lot of different landing pages
• Components of a great landing page:
• Short description of what you are selling
• VERY LARGE calls to action
• Very few options that are not desired action
• Very short # of clicks between landing & completing action

9. A great landing page

10. Exercise: COCA
CrossFit Gym
• Path to sale
• Customers see a Facebook ad ($10 CPM)
• They click, go to a landing page (2% CTR)
• They give their email address/phone to get a free class (5% conversion)
• Sales person calls them, schedules free class (70% never get in touch)
• They go to free class (50% show up)
• They sign up for a membership (50% sign up from free class)
• What is COCA
• What changes could they make to decrease COCA?

11. Key trick: UTM Tags
• What they are:
• Tags at the end of URLs that identify ad
• When to use them
• Each ad should have its own UTM code
• All ads should have a code
• How to use them
• Lets you calculate CTR, conversion rate, COCA BY AD
• https://support.google.com/analytics/answer/1033867?hl=en (google “UTM
builder”)

12. What we will be going over
• Intro to customer acquisition
• Key Metrics
• COCA
• LTV
• ROI
• Choosing the right Channel

13. Lifetime Value of Customer
• Revenue per sale
• # of items per sale x revenue per item
• Gross margin
• Profit per item / Revenue per item
• # of sales per customer
• Over lifetime of customer, how many purchases do they make?
• If it’s a subscription, how many months do they stay around?
• LTV = Revenue per sale x gross margin % x # of repeats
• LTV = (# of items per sale) x (revenue per item) x ((item sales price – item
cost)/(item sales price)) x (# of sales per customer over lifetime)

14. LTV Exercise
• Selling Neckties Online:
• $25/tie, $10 cost/tie, average 2 ties/checkout.
• 2.5 repeats per customer
• What is LTV?
• How can we increase this LTV?

15. Ways to maximize LTV
• Increase dollars per checkout
• Sell higher cost items
• Sell bundles of many items
• Increase Gross Margin
• Increase repeat rates
• Actively market to your past customers to remind them
• Sell subscriptions and auto-renewals!
• Good products & customer service

16. What we will be going over
• Intro to customer acquisition
• Key Metrics
• COCA
• LTV
• ROI
• Choosing the right Channel

17. Marketing Return on Investment
• ROI = (LTV) / (COCA)
• ROI decision making:
• <1: you are losing money on your ads.
• You need to increase LTV, or decrease COCA
• =1: breakeven.
• >1: You are making more money than you put in. Advertise more!
• Beware cash flow issues with long-period LTV

18. What we will be going over
• Intro to customer acquisition
• Key Metrics
• COCA
• LTV
• ROI
• Choosing the right Channel

19. Which channels to choose
Channel Subtype Demand Creation vs Fulfillment Audience Selection
Facebook Social • Demand Creation • Who is fan of what page,
who is friends with who.
Facebook Targeted
Paid
• Demand Creation
• Demand fulfillment for
identity/interest based
demand
• Who they are
(demographics)
• What they are interested in
Google Adwords • Demand fulfillment • What they search for
Google Display • Demand creation
• Demand fulfillment if well
matched to site
• What site they are on
(interest)
Other Sites Display • Demand creation
• Demand fulfillment if well
matched to site
• What site they are on
(interest)

20. Which channels to choose (Part 2)
Channel Subtype Pro Con
Facebook Social • Cheap to free • Very labor intensive
• Less functional in “new
Facebook”
Facebook Targeted
Paid
• Insanely niche targeting
capabilities
• Very effective when targeted
properly
• Technically challenging interface
• Only works if well targeted
Google Adwords • Very effective for right product
• Simple creative
• Clicks often expensive
• Needs sufficient search volume
Google Display • Good for non time sensitive
products
• Creative can be challenging
Other Sites Display • Great for very targeted niches • Negotiated individually, requires
creative

21. Exercise: What Channels to use:
• Heating Oil Delivery
• SAT Tutoring
• Card that combines all your credit cards
• Discount shopping browser plugin
• Necktie of the Month