A frequent issue seen in an early stage company is facing the inability to optimize across all channels while operating with a small team. This is problematic, because those looking at investing in startups are on the lookout for a seed stage company that has mastered big results stemming from a small team. So how do you achieve promising results that peak the interest of start up business investors? A good place to start is your CPA.
If you’re seeing a high cost per acquisition then you should take a look at what Josh Snow has dubbed potentially the most overlooked strategy - CRO. Continue reading for a crash course in Conversion Rate Optimization directly from Going Public’s mentor, self funded millionaire and serial entrepreneur: Josh Snow.
Hey, Josh here! If you’ve been in the eCommerce world for any amount of time, you have probably heard people talking about CRO but I’m here to break it down so you’ll leave equipped with the tools to start improving your conversion rate.
CRO is short for Conversion Rate Optimization. It is the process of optimizing your site and/or landing page experience to improve conversions.
It's important to understand there are two things happening in the advertising world right now:
Then…
So you've got competition (the advertisers) being pulled out and more supply (impressions) being thrown in.
It's supply and demand.
With supply increasing while demand is pulling back you have this delta that is made up by the opportunity to advertise for a cheaper cost because you have more people coming in.
When advertising in the marketplace a firm is committing dollars in hopes of a sought-out result… A conversion of sorts: building subscribers, selling products, or whichever measure the company finds value in. More often than not, the company is paying for a placement in the marketplace to feature their offer. This offer needs to be so good that a user is compelled to click onto the offer and convert into the desired customer or subscriber the firm set out for. So the catch here is standing out in a competitive marketplace where you’re fighting to turn impressions into clicks and clicks into customers.
This goes back to understanding the marketplace - over time more firms will discover the power of advertising while the supply is high and the demand is low. This means the cost will be down. But as soon as one team comes in, others start picking up on the success, replicate it, and suddenly there’s blood in the water as the sharks start showing up.
This is why the advertising platforms built the space as an auction marketplace: They know more businesses are coming in, and placement prices will go up.
When people say, “I want to acquire people for less money and I want more of them.”
That’s cool, I get it, but what we fail to look at (because it's uncomfortable and it's not easy) is the quality of the offer - how enticed are people to click your deal over the next? How will you compete against the other offers in the marketplace? This is an evergreen way of tightening in your cost no matter the state of the market.
Take Dollar Shave Club for example… It’s very clear! It’s a dollar.
It's a club, so I'm paying monthly. And it’s about shaving.
THREE WORDS: Dollar Shave Club.
If your deal can't be broken down into three words like that, you don't have a business that will disrupt a person’s time spent online. Users are not going to be enticed enough to click, meaning less conversions and a higher cost per acquisition.
Once you’ve defined what’s unique about your business and how you’re going to break that down into a quick hook, you need to figure out what the offer is you’re putting into the marketplace.
Is it 50% off the first month?
Is it a starter kit for 30% off?
…What is making people want to click?
Take Manscape for example. One look at their current deal for new customers, and you can see how they are utilizing perceived value to create long term, recurring customers.
For $89 you get $50 off their full starter kit with a bundle of free items.
Let's just say they have 70%-80% margins (I would guess), and it probably takes $70 to acquire a customer… That's giving them $89, then it's $50 off plus you get free underwear, boxer briefs, travel bag or toiletry bag.
So the customer gets the starter kit, $50 off and all this free stuff. As you know, people put their perceived value pretty high on things like this.
Fast forward and now their customer is getting rebilled every two or three months for those replacement items. So yeah, $89 makes sense to Manscape.
With the simple tweak of increasing the perceived value of your offer, you are building lifetime value.
The deal – What are you selling?
When it comes to the offer, most people will try a bit of price testing when they first start their business like, “Let's try $49.99! I read in a book that 9’s convert higher!”'
They just make up prices rather than testing offers.
This stuff has been around since the beginning. It’s not just, “I'm gonna say this water bottle is $1.99”
Where's the offer?
What's unique about this?
It’s as though you think that the offer itself is the price.
Why $1.99?
Why not tune it in?
Why not $1.49?
Why not buy 12 get 12?
Why not buy 6 get 6 free?
Why not a subscription model?
I drink water every day, so why would I not subscribe?
Give me an offer!
Too many people are just sending people straight to their product page. You have got to look at your overall advertorial. Don’t just say, “This is the best teeth whitener since sliced bread!” in your advertisement and expect people to be compelled. Take a step back and ask…
That’s the key.
Take a look at these three questions on your conversion rate optimization journey…
It’s gotta be the most underutilized marketing strategy!
Did you find this article from Josh Snow helpful? Witness his mentorship in action on Season 1 of Going Public as he mentors the four featured companies. Remember, you can invest along the way. Watch here.
