How To 3X Your Marketing ROI

Alright, today we’re going to go over our thesis of how you can leverage data and technology to triple your marketing ROI. So, what that essentially means is that for every one dollar that you spent in marketing, you’re putting three in your pocket to the bottom line. That’s essentially what we help businesses do, and today I’m going to explain how we do it. Mainly by being smart, using the data from your customers, and some more of modern approaches.

So, the first thing we need to do is calculate your metrics. How much is a customer worth to you? It has two different components to do it, the first is the lifetime customer value which is the average purchase value (how much they spend when they come to you) multiplied by the average frequency rate, and then times the average lifespan of the customer. So, frequency is how often they come per year, and then [00:01:00] average lifespan is how many years they stay with you. Taking that on an example, you have a hundred dollars average spend, times 10 visits per year, times five years, is $5,000.

A lot of times, clients will come to me and say you know, my average spend is all over the place, frequencies are all over the place, and that’s okay. That’s going to be every business, every customer is going to be different, and so the easiest way to do it to look at a bell curve. So you have the meat in the middle and the two ends get smaller and smaller. We want to look at the median, in the middle, not the average. Averages are skewed a lot by outliers. So if we look at the median, which is the most common number of occurrences, that’s going to give you a better idea of what that average value is, rather than the arithmetic mean. So use that, that will help a lot. [00:02:00] It will give you an idea of the middle of the bell curve.

So back to our lifetime customer value. One new customer is, in this example, worth a gross amount of $5,000. So every time you have a new customer come to this lifecycle, on average, they are worth $5,000 to your business. So then, what does that mean going out further from the customer is the value of a lead. That’s going to be the lifetime customer value (what they can potentially be worth to you) times the gross profit margin (how much are you keeping at the end of the day) and what’s your close ratio. So if you’re speaking to this person, how many of them are coming in? One out of ten, one out of five, one out of two? In this example, we’re going to say fifty-fifty, and the gross profit margin is 30%, times the $5,000 lifetime customer value, you’re looking at a $750 lead value.[00:03:00]

So then if you want to break-even you can afford to spend this much on acquiring a new customer. This is really useful for whenever you go to marketing, you’re making decisions. You know that “I can afford to spend this much to break-even.” But we’re not here to break-even, you wouldn’t be watching this video if you just wanted to break-even. So, what we do then is divide that by three, because there’s going to be your 3x ROI, and you’re now at two hundred fifty dollars.

Focusing on this is where you want to look for your standard, $250. This means that anytime you can acquire a customer for that amount on average (obviously it’s not a one for one) but on average. If you can get one of these $5,000 customers for $250, you are tripling your money based on these metrics. [00:04:00]

The next thing we want to do is determine the top customers, because this is going to help us get to that $250 and lower, and bring in more profitable customers. The criteria are:

• Who spends the most money?
• Who’s the most profitable?
• And who is the easiest to deal with?

If you can find someone in the middle, that’s your holy grail there. These are the customers you most want to have in your business, because they are going to give you the most profit, the least headaches, and really help you figure out who you should be working with.

I like to use a story of Target, they have a lot of data on their customers. They have loyalty cards, online commerce, and a lot of data on their customers so that they can make some pretty crazy determinations. One of them is a story about a girl who was a frequent Target customer,

[00:05:00] and she started getting ads for pregnancy-related items. And what Target had done was used the data they have from all their different customers to determine, based off the purchases she’d been having recently, she was very likely to be pregnant.

What they had done before that was to determine that this is going to be one of the most valuable, profitable customers they can have just because of all the things that come with that. Whether it’s diapers, or formula, or high chairs, or a crib, whatever it is. This is one of the most profitable customers they can find. So they found a way to figure out who’s pregnant before anyone else knew.

The funny part of the story is that they started sending these ads to this girl, and the parents saw these and got very upset at Target for insinuating that their perfect daughter could be pregnant, and lo and behold, she [00:06:00] actually was. They knew it before the parents knew it, and that’s using the data. Because they found out who is the most profitable and spends the most money with them.

So once you start to figure out who these people are, you want to dig even deeper. Their demographics, you know, age, where they are from, geography, all of the things that you can put towards a person. What their job is, as much as you can figure out, then you would want to go deeper, the psychographics. Some of their feelings, or views of the world, or anything else you can do to really get in their head and understand who this person is, how they think. What moves them? Who influences them? Who do they look up to?

All these different things really start to help you paint a picture to get and attract them. Find them. Behaviors and interests is another one you know. What do they like? What are their interests? [00:07:00] What do they spend their time doing? How do they behave themselves?

So once you can dig really deep into who they are and how they think, you can match them and really connect your messaging with them. So that, when you tell your customers what you do, and why is worth it to them, and why they should work with you and be your customer. It really speaks to them as a person, their problems, their fears, their drives, desires, all those different things really connect with them on a deeper level because you know who they are, and you took the time to figure out who you should spend time in figuring that out for. Because that takes a lot of time and you can’t do that for everybody. But if you can figure out who is most worth it to do that for, then you’re going to be using your time most wisely.

So the next is applying this to your business. How do you determine who these customers are?

[00:08:00] How do you actually do that? I just talked about “what you’re doing” but, “how do you actually do it? You can do it manually, or you can do it data-driven.

Manually is just kind of hypothesizing, and saying “ think these people do this” and “this type of person is like this” and maybe doing a little research on the internet. Say “these people have these common factors.” Maybe doing some interviews with some of your better customers or “what customers do you like working with?” Maybe asking some other people in the industry, related industries, and then starting to paint that picture of who these people are.

Manually is what people have always done in the past. Traditionally  that’s all you could really do. But today with data, you can bypass a lot of that and just like the data speak for itself. We’ll get into how you can collect some of that data and get access to that, but for now just know that there’s two different ways to do it. Either way will work, you just need to work on figuring out who these people are.

It also taps into the [00:09:00] Pareto principle. Like I said, you know, it takes a lot of time to do these things, so you want to find the 20% of your customers who bring in 80% of the business. Same thing, you can apply this Pareto principle to anything. You’ve probably heard of it, but you could say that the 20% spent on these type of customers is going to bring you 80% of the benefit.

Do that for the next bullet point, 80/20 how do you reach them? Where’s the 20% of channels that’s going to bring you 80% of these types of top customers? Just start thinking in terms of that, and you’re not going to get hung up on every single last one. You’re going to say where am I going to get the most bang for my buck? That’s how we focus on things here at TopLine Growth.

So, the next one is determining your channels. Again keep that 80/20 principle, in mind. Where do your ideal customers congregate? Are they online? Offline? Both? Which ones in each of those do they like to do? What websites? What platforms? [00:10:00] What places? You know, where are these people hanging out?

Once you do your research and you figure out who are they, where do they like to go, you can start making some hypotheses and some assessments to say, “Here’s where I know they are.” Or ask them and you can start to see some commonalities and patterns, you know. Some of the clubs, organizations, groups, channels, they’re going to be somewhere, if you look you can see, because these people are like-minded, in one regard or not, if you can find those interest like we talked about before, that means that there’s going to be other people with those interest, and you’re going to be there reach them.

Another thing you are going to want to look at is where you have access. Is there anything that you have access to that other people don’t? Any unfair advantages? Maybe in your industry, or your contacts? Or some kind of access that other people don’t. You’re going to want to look there first because you have an advantage.

Visibility, are actually able to find them? [00:11:00] Is it something you can search for? Scrape data on? Are you actually able to see these people? You need to ask yourself that when determining which channels are right for you. That’s what this is all about, it’s assessing, you know, what’s the best way to get in front of these ideal customers that you want to talk to?

Another question is, what does your content cater to? So, whatever your business is in, does it make sense to be, or lend itself most to images, video, text? Which one of these is best for your business, you know, if you’re in some kind of a restaurant, do the images work better? If you’re in some kind of sporting event, or something similar, “would video be the best for me?” You have to determine that. So is it text? Which one of these is best for what you do and how can you connect to these channels? Last one that I like to ask is, are you an authority? Do you have any credibility or experience in any of these channels [00:12:00] where you can leverage that, and get better access to these ideal customers?

Once you start to suss these out and say, “these are the ones that make the most sense to me based on these questions,” then we are going to want to start assessing that. So, will your message actually reach them in this channel? How can you get it to reach them? What’s the cost that you’re going to reach them? CPM is a good measurement (that is cost per thousand impressions) what cost per thousand impressions are you paying? If it’s more than $20, it’s probably too expensive, unless you have a really high closing rate, and that’s a different story. Usually somewhere between $4 and $20 is pretty good. Obviously lower is better.

Is this the best way to reach these people? You got a bunch of different channels, but is there one that’s out-performing any of the others? If that’s the case, do you double down or diversify? If you have one that’s working really well, you probably [00:13:00] want to double down on it, if it’s not that much better, it’s time to diversify and say “let’s try this other one.” Which is placing small bets, you know. If they’re all pretty equal, then start parsing out into new different channels, and see if you can get too good results from that. Then start doubling down on the best ones.

Then, just like in the financial services world, rebalancing. You’re going to want to assess those on a monthly or quarterly basis to see, “alright which ones of these are making me the most money?” Because remember, the entire goal of this, is to triple your marketing spend. For every one dollar you spend, we want three to the bottom line.

So second last thing is going to be the beauty of data, this is where I talked a little bit about getting the data for the approach of the research. There’s lots of different spots that you can get it from. If you have an email list of your customers, a CRM, [00:14:00] (customer relationship management tool) like salesforce or Hubspot that you use to keep track of your customers. You’re going to get lots of good gold in there. Google Analytics for your website is going to have people in there. Facebook has a ton, especially if you’re using their advertising platform, then you’re going to get insight into a lot of data about these people, and you can start looking for patterns, and ways to connect the dots.

The other one that we really like and we’re big fans of is customer-facing apps. Think about your Starbucks or Chipotle, or Chick-fil-A. All have these customer-facing apps where you can make purchases, you get loyalty points. They incentivize you to use them. But at the end of the day, they’re collecting data on you to see how good of a customer are you to them? So when you go and scan the app before your purchase, now they know how much you spent there. They know how often you come, and they can start marketing to you. They can put push notifications out there to [00:15:00] entice you to come by, and they start to build a profile around who you are. Then they can say “should we dedicate resources to this person?”

Once you have the data, the next thing you want to do is interpret it. Search for patterns. What dots can you connect? If you look at your top customers, what do they have in common? That’s where you can start to use the data rather than your hypotheses or just opinions, and say, “Alright, all these people are my top customers and they all have x, y and z in common.” This is probably not a mistake and something that should be paid attention to, and that you’ll want to explore further.

Even with the data, you’re still going to have to pose some hypotheses and seek confirmation through the data. Like I said, you’re searching for patterns, connecting dots. “Who spends the most?” Is an example but you would also want to go down below that because there could be other niches within that to see who spends the most, and what are those people have in common?

You want to build a [00:16:00] full profile and not just the list of your top customers. It’s a full profile of who this person is, what they believe, what they think, how they feel, or you know, do they have family? As much as you can to paint that full picture. Now when we go back and we create that messaging, it’s going to connect with them on a much deeper level. And that’s where your $1 will turn to $3, as opposed to losing money.

Last thing is going back out in the marketplace, some of our favorite places to leverage the data. Facebook audiences, because they have multi-billion dollar algorithms to figure out who these people are and connect those dots for us. You can go in, and this is something we use all the time, is the lookalike audiences, and searching for behaviors of these different people.
There’s a reason why they’re worth something like $800B I think they’re up to. There’s a reason for that because they have the data.

Google [00:17:00] search queries is another one, because you can see a lot of the buying intentions behind people. And if you can rank for those, or purchase those in the bid/ad auction, then you going to be able to leverage your data better. Go for more obscure niches and search queries that aren’t so expensive.

And then the last point should leverage your data is in decision-making. So when your business decisions of who you want to cater to, you know, what will these pay off? Who should I hire for this? Any decision that is important can be bolstered with data behind it to see if you are serving your top customers. Or if it’s an area that you want to be in you can use the data to help you with those decisions. So those are the big three places or where we like to use our data. And then in conclusion, steps, very simple.

• Determine your metrics, that we did in the first part
• Figure out who your are dream customers are. Who do you really, really want to go after? [00:18:00]
• Find out how to most effectively and affordably reach them. Those are your channels. Where do you have access? Where are you an authority? What does your business most connect with? What type of content?
• And then rebalancing and assessing those channels on a frequent basis, to make sure that they’re still the best.

Then you’re going to support your decisions with data, like we said in the previous slide. Use the data to confirm and help you make decisions, and then use it as well to go onto the marketplace and find ideal customers.

And last thing I’ll leave you with this, if you’re looking for help on any of these steps, or anything in your marketing strategy, that’s exactly what we do here at Topline Growth. We are all about taking that $1 of marketing and turning it to $3, and we’ll be happy to help you do the same.

If you have questions, you can always email me at [email protected], and I will be happy to work with you and help you out the best I can, until then, talk to you.