After yesterday's repost from The Starting Gate, The 3 Conflicts in Every Entrepreneurial Company-Part 1, a young advertising exec sent me the following tweet:
"@rhhfla What to do if the spending to acquire the new customers is the problem? And what mediums should be used to acquire these?"
If you missed the post, one key point for an early stage company is to work to accurately determine its customer acquisition cost in order to grow revenue. What I replied to the ad exec was:
"@xxxxx Compare monthly targets against analytics for each media in terms of both leads and closes. Change investment to most effective one"
Recognizing the limitations of 144 characters let me elaborate.
For every media one should set monthly targets for leads, closes and the conversion %. These targets are then compared against actual results. Several software programs allow a company to determine where the leads come from (Twitter, Pinterest, email, etc.) and how many leads closed. Leads and conversion ratio (closes/leads) are the key performance indicators to analyze. If leads are below target, it may be a messaging problem. If conversions are low it may be that the closing process is too complicated (change website, train staff better, etc.) or pricing needs to be evaluated. Where people drop out of the conversion process may tell you which problem it is.
If closes for a media reach the monthly target, adjust to new conversion ratio and put more investment in this media. The assumption here is that the number of closes is meaningful. Herein lies the art or common sense behind the science and numbers.