Thinkific has risen to become the top searched course platform since their CEO Greg Smith last appeared on the show and today he joins us again to share some amazing updates. Our conversation with Greg covers the story of Thinkific’s evolution, and the company’s best practices for marketing, hiring, subscriptions, and corporate culture. We dive right in hearing Greg’s story about his college how-to blog for passing the LSAT that he morphed into an online course with the help of his software developer brother. Next up, Greg gives us a bunch of metrics about the company’s gross revenue currently, how much the average course creator would pay and earn using Thinkific, and which types of courses tend to scale. He also touches on some of the company’s strategies around getting course creators prepared to put their best foot forward and create packageable content that adds meaning to consumers for growing their own businesses. Our interview then moves onto the topic of hiring and staff, and we hear Greg’s thoughts on delegation, headhunting, keeping vision aligned, and how to involve late cofounders from an ownership perspective. Thinkific stands as a great example of a company that scaled fast through a great team and business model so make sure you don’t miss this one.
TIME-STAMPED SHOW NOTES:
[00:21] Before we jump into today’s interview, please rate, review, and subscribe to the Leveling Up Podcast!
[00:26] Opening comments on Greg’s company Thinkific, the top searched course platform.
[01:16] How Greg’s LSAT college blog morphed into his first online course.
[02:56] Metrics on Greg’s course: its price, continuing amazing monthly sales, etc.
[03:36] How people are finding Greg’s course: YouTube and Google SEO converts.
[04:39] The way thatThinkific makes money from a freemium option upwards.
[05:27] Further metrics on Thinkific: 110 plus staff and 14 million ROI plus.
[06:42] What course creators make on Thinkific: from 5000 to tens of millions of dollars.
[08:00] Percentages of people who run courses on Thinkific that continue to scale.
[08:42] Three milestones for a course creator that bode well for future success.
[09:26] How the infrastructure trains course creators to make and market courses.
[11:40] What qualifies as a valid reason to run a course.
[12:50] Contributors to Greg’s success: a good team, paid ads, and refining focus.
[14:14] What Thinkific is doing to manifest its corporate culture: investing in people.
[17:43] How online course searches and Thinkific’s business focus bodes for their future.
[21:40] What people who run cheap courses on Thinkific do to market on low budgets.
[23:00] Greg’s biggest challenges in the last three years: knowing what to delegate.
[23:50] Why Greg only focuses on team building and strategy now.
[24:15] How well people that Greg hires do in tasks he thought he was good at.
[25:10] Going beyond workplace gimmicks to build a corporate culture.
[25:48] Whether a total hands-off leadership approach is really the best one.
[26:50] Greg’s approach to keeping staff on track by helping them articulate the mission.
[27:37] Employees who ended up merging into cofounder positions at Thinkific.
[28:35] Strategies for adding cofounders and equity along the way.
[29:30] Specifics of arrangements for how much equity to give cofounders.
[31:27] Greg’s must read books, favorite business tool, and companies he follows.
Hey everyone! In today’s episode, I share the mic with David Barrett, CEO of Expensify, the world’s leading application for expense management with 6 million users.
Tune in to hear David share why Expensify relies only on word-of-mouth advertising, why he believes that focusing on top-line revenue growth isn’t actually good for business, and how the Expensify team proved the naysayers wrong when they said the business couldn’t scale.
Hey everyone! In today’s episode, I share the mic with Tim Schmoyer, CEO and founder of Video Creators, which grew out of something organic and is now one of the leading businesses that seeks to help others create financially viable YouTube channels.
Tune in to hear how Tim helped a CEO build a channel that gets 30M views a month from scratch, how he’s helped people further their own lives and careers with his videos, and how you can make money using a number of revenue streams.
Hey everyone! On today’s episode, I share the mic with Aaron Bird, co-founder and CEO of Bizible, a B2B marketing site that helps companies with their marketing plans and attributions.
Tune in to hear Aaron discuss why Bizible is dominating the industry, how they enable businesses to measure and plan for revenue, why solving the “right problem” is so important when founding a company, and what the only reason that startups fail is.
Hey everyone! In today’s episode, I share the mic with Tom Villante, CEO of YapStone, one of the leading online payment service providers for global marketplaces and large vertical markets.
Tune in to hear Tom explain how an investment banker became CEO of an online payment provider, how he made YapStone profitable after just two years, the challenges of growing in such a competitive space, and why it’s difficult to motivate your sales team if you don’t know how to sell your own product.
00:50 – Tom Villante is CEO of YapStone, the leading online payment service provider for global marketplaces and large vertical markets.
They are on track to do over $18 million in payment volume in 2017.
01:10 – Tom has been doing this for 17 years, even though he thought he’d only be doing this for 18 months.
01:57 – YapStone’s primary function is online payments and e-commerce solutions for some of the largest marketplaces in the world.
02:41 – YapStone tries to make the payment experience seamless.
03:50 – Tom was an investment banker in his twenties, then realized the Internet was the next frontier and invested in Core, an Internet consulting firm.
04:18 – A consistent issue that kept cropping up was payment processing
PayPal was the only one in the game at the time, so they decided to tackle payment processing from a different angle.
05:00 – They started a division of YapStone called “Rent Payment” and became the largest online provider of apartment rents.
05:13 – YapStone had to figure out who would pay the merchant fee in their new structure for Rent Payment. Landlords were not willing to pay 2-3% of rents as a fee.
05:41 – YapStone created a layer of automation which integrated seamlessly to property management software, which helped track payments.
06:12 – They found having industry-specific knowledge was helpful in giving them an edge and allowed them to have a larger profit margin.
07:06 – Tom admits that he had no idea what he was doing in the beginning when working atYapStone.
07:32 – The one thing you learn quickly when you create your own business is that you are not entitled to anything; it’s not about you, it’s about how you can be helpful to your co-workers and customers in order to create success.
08:29 – Of the 5 companies in which he was an angel investor, YapStone is the only one that took off.
08:48 – Tom ended up taking overYapStone because he enjoyed working on it so much; he was the majority owner and he took over for the person who had been running it.
09:42 – YapStone eventually branched out into vacation rentals and then the sharing economy.
09:53 – They only raised a small amount of money in the beginning and then didn’t need to raise money for 11 years; they were modestly profitable after the second year.
10:22 – They expanded and became profitable by using traditional routes of self-promotion.
11:46 – Tom would not depend on Facebook ads alone and encourages getting your hands dirty to sell your business.
12:48 – Tom invested in Core in 1997. The business went from $1 million to $35 million in revenue.
13:52 – In early 2000, Core lost customers and the business tanked.
15:47 – One of the powerful things that Tom has done is never being afraid to get on the phone. He values phone and face-to-face contact for establishing relationships.
17:00 – Eric agrees that dinners with customers is valuable to building relationships.
17:24 – Tom hired Deb Tannenbaum as Chief People Officer.
18:22 – It’s important to have someone making sure that the office culture and people are being taken care of. Career development and general well-being are important at YapStone.
19:15 – Culture is more than just pizza parties and ping-pong; what people really want is career and personal development.
19:42 – Tom will sit down with new employees and make sure they are fitting into the culture.
20:36 – They didn’t seek out a Chief People Officer, but Deb came to them at a time when they needed better leadership and improved office culture.
21:23 – Deb helped them to double their Glass Door rating after it had dropped.
22:03 – In 2011, they raised $50 million in equity from Excel Partners and Meritech Capital
22:45 – The one thing entrepreneurs need to be cautious of are the covenants around debt.
23:37 – Tom will get up at 6 a.m., do yoga, and meditate; this helps him focus more during the day.
23:53 – He speaks to 3 direct reports on a daily basis.
24:35 – Tom constantly tries to challenge his own convictions by talking to others in the industry, even his competitors, because it is helpful.
25:20 – Eric references Gary Keller’s opinion that there are three things that matter regarding direct reports:
1) The person needs to be damn good at recruiting
2) Within the first 90 days, needs to bring in $100,000 in revenue
3) Needs to have a vision for the future of the team
26:09 – Tom agrees with Gary Keller’s assessment, with one caveat: he would say the report should bring in $100,000 in revenue within 180 days.
26:38 – Tom recommends Tony Hsieh’s Delivering Happiness. Treating people as individuals instead of cogs works immensely towards creating positive office culture.
Hey everyone! Today I share the mic with Amanda Bradford, CEO of The League, a dating app for aspiring power couples.
Tune in to hear Amanda share why her dating app for intellectuals has a 500K wait list and how it’s converting in high volumes, the effects of monetizing the app for both men and women (especially in regards to user habits), and the value of finding the right people to ramp up your company’s growth.
01:34 – Based in Austin, they are opening offices in Dallas and Houston; The League was recently launched in Miami, Atlanta and Philly
01:48 – Looking to expand their dating app to LA, San Francisco and New York
02:25 – Finding your perfect match
02:25 – Users are required to put in their Facebook accounts as well as their LinkedIn which results in a more curated environment
03:00 – Users are matched by considering a variety of factors such as earnings, educational institutions, fields and social graphs
03:31 – It aims to curate users that are ambitious, intellectual and looking for a relationship
03:40 – Just started generating revenue by offering paid memberships
04:04 – The waitlist for The League has ballooned to over 500,000
04:56 – Does not compete with Raya, a dating app targeting wannabe celebrities; at The League, they are targeting more professionally oriented people
05:23 – Appeals to intellectuals such as writers, bankers and journalists
05:54 – Matchmaking: an outdated concept
05:54 – Not uncommon for matchmakers to charge as much as $60,000
06:18 – Matchmaking is an ancient concept and dating apps will replace them over time
07:58 – With the emergence of smartphones and improving technology, people can select their date from a wider pool; chances of finding a good match increases
09:10 – The League wants to be known as a dating app and not as a marriage platform
09:29 – Sends congratulatory gifts on the birthday of league babies
09:44 – Folks in their early 20’s are just looking to date and figure out what they want
10:02 – In spite of giving only 3 to 5 matches, conversion rate is really high
11:10 – Analyzing membership structure and revenues at The League
11:10 – It monetizes impatient people who value their time and are actively looking for a perfect match
12:02 – Annual membership is $180 which works out to be $15 per month
12:47 – Unlike other dating websites which try to monetize the men, revenues at “The League” are split equally between men and women
13:02 – User behaviors have improved after switching to a paid model
14:00 – Marketing strategy
14:00 – Relies on referrals for marketing
14:16 – Uses Hustle Con as a platform to meet potential users and spread the word before launching the app
15:12 – Raised $2.8 million so far
15:18 – A successful match leads to two people leaving and many more joining the app
16:18 – In spite of Tinder being one of the top four Apps used by millennials, fundraising is not easy
17:18 – It’s a lean organization with every person wearing multiple hats
17:31 – They want to use the latest, cutting edge technology to solve people’s problems
19:00 – Aiming to retain non-singles even after they’ve found a match
19:51 – What is the one big struggle you faced while growing “The League”? – Getting the right people on board
21:17 – Entrepreneurs’ Organization managed to increase their revenues from $3 million a year to $22 million a year in a space of just 2 years by hiring great people
21:45 – Monetization has enabled Amanda to hire some great people which has placed The League on the path for fast growth
22:33 – What is one big thing, positive or negative that has impacted your business in a big way in the past one year? – Amanda moved her office to a live/work house and now lives in a studio on the top of her office
25:24 – What’s one new tool that you’ve added in the last year that’s added a lot of value, like Evernote? – Mode Analytics – It is super easy. You can hook it onto any database and put SQL in it
26:39 – What’s one must-read book do you recommend? –Shoe Dog – The story of Phil Knight starting Nike right out of business school
28:20 – Connect with Amanda on her website or Facebook
Hey everyone, today I share the mic with Nathan Hirsch, CEO and founder of FreeeUp, a platform that connects businesses of all shapes and sizes with top freelancers across the world. He also founded Ecombalance.com, a monthly bookkeeping service for e-commerce sellers/agencies, and OutsourceSchool.com where he teaches his hiring processes.
Tune in to hear Nathan share how a frustration with the hiring process forced him to come up with the idea for FreeeUp, how he acquired their first 500 customers, the process that will get them to $5M in revenue this year and allows him to manage 500 freelancers remotely, and the success of their referral program.
01:24 – Nathan is a 28-year old serial entrepreneur, he started his first business by buying and selling text books, before moving on and finding his niche in baby products, home goods and outdoor stuff
02:04 – Nathan got the idea for FreeeUp because he got frustrated that he was spending too much time on the hiring process and wanted to get a way to access the top talent
02:35 – Nathan still does his e-commerce business and it makes him 5 to 7 million dollars a year—he runs it through Amazon’s drop shipping
03:42 – FreeeUp is different from other marketplaces as it is not a job order, when customers submit a work request, FreeeUp does the vetting and handpicks a freelancer just for you
04:12 – They also offer a “no turn-over guarantee” – if the worker quits for any reason, FreeeUp covers all training and placement costs associated with finding a new worker right away
04:34 – Nathan hired a lot of people for his own business and started the pool of freelancers for FreeeUp from there, he then did Facebook ads and looked for more recruits
05:01 – Nathan then did a referral program for clients and workers
05:24 – They have a client rate and worker rate and get their income from the difference of the hourly rate
05:52 – About 15% of the workers at FreeeUp are from other marketplaces like Upwork and they are paid through there
06:47 – FreeeUp is about to hit its goal of 7,000 billing hours in a week
07:02 – In terms of revenue, they are looking at hitting 4 to 5 million this year but this depends on busy season
07:31 –FreeeUp secure its first 500 customers through cold emails
08:18 – Nathan built his own tools because the outside models do not fit his own business model
09:47 – In terms of acquiring clients, the referral program is working well for the company, they contacted a lot of influencers and give good kickbacks
11:03 – Nathan manages 500 workers remotely – he has 20 people working directly under him for FreeeUp, he has 10 people for his Amazon team and the marketplace of 500+ freelancers
11:34 – The freelancers have big group chats that include everybody and Nathan and his partner interact with them on a daily basis
12:02 – Nathan uses Skype for communicating with his teams
12:21 – Tell us one big struggle you’ve faced while growing either of these businesses – When Nathan was just starting his Amazon business, he had this vendor that he was selling a lot of products from
12:39 – It was so good that Nathan did not look at other vendors and he was able to build the business to a good point
12:59 – Nathan had a vacation and on the first day, his manager said the supplier did not want to work with them anymore
13:07 – An hour later, Nathan’s accountant called saying someone filled a tax return in his name and stole $60,000 from the government
13:23 – Nathan learned never to rely on just one supplier or revenue stream
14:26 – What’s one big thing that’s really impacted your life dramatically? – Two to three years ago, Nathan’s house was broken into and the thieves stole his girlfriend’s car, his laptops, and everything valuable—they ended up living at his girlfriend’s parent’s house for 6 months
15:22 – It was busy season and Nathan had to work on orders while trying to get his life back together
15:33 – What’s one big change you’ve made in the last year that has impacted you or your business? – Working out, joining a gym and adopting a puppy
16:34 – Nathan got the dog from the pound and says the dog is really well-behaved
17:03 – Nathan opened an office in year 5 after being remote and realized it was not a good business decision so he went back to remote
18:22 – Nathan’s partner worked on building the company culture for their remote team
19:10 – Nathan says the way you get the most out of your workers is by having a great culture
19:30 – During hiring, they were already looking for a specific kind of person – someone who enjoys working and is passionate about what they do
20:10 – It’s about creating an environment where honesty and feedback is appreciated
20:22 – It’s about treating people well and giving recognition
20:46 – What’s one tool you’ve added in the last year, like Dropbox? – JIRA
21:17 – What’s one must read book you’d recommend to everyone? – Zappos’ The Pursuit of Happiness
21:54 – What’s one blog or podcast that you tune into all the time? – Tracy Hazzard
22:23 – CEO Space is a community of business owners that come together for networking and workshops
23:12 – Go to FreeeUp.com to book an appointment with Nathan and if you sign up and mention this podcast, you get a dollar off your first worker forever, check out the blog and Nathan’s book
3 Key Points:
Do not rely on just one source of anything—income, supplier, whatever. Diversify and work with multiple sources to ensure the sustainability and the growth of your business.
Managing a remote team successfully means having a good, top-down company culture.
Honesty in feedback is important to creating a winning company.
Hey everyone, today I share the mic with Daisy Jing, CEO of Banish, the natural solution for skin problems.
Tune in to hear Daisy discuss how she accidentally became an entrepreneur and created her own line of skin care products, how she grew her business to $3 million in revenue, how she maximizes YouTube as a marketing tool (and grew herchannel to 60M views & 200K subscribers), and the importance of building a community.
00:39 – Leave a review and rating and subscribe to the podcast
01:05 – Eric welcomes Daisy Jing
01:20 – Daisy is the 28 year old CEO of Banish, a company that offers natural solutions to skin problems and blemishes
01:50 – Daisy started the company in 2013, from her own kitchen
02:11 – The revenue of the company is around $3 million
02:26 – Daisy says her YouTube channel is instrumental in her business’ success
02:36 – Daisy’s videos show her reviews of different skin products
02:47 – Daisy gained enough followers which gained her enough trust to launch her own products
03:09 – Daisy started to mix stuff in her own kitchen and within weeks of using it, her followers noticed how good her skin looked
03:23 – Daisy decided to make a few batches and sell it
03:32 – Daisy believes it’s the videos and the community that helped grow the business
03:47 – One video, Growing Up Ugly, got more than 200,000 views
04:09 – In the skincare industry, trust is important
04:29 – The number of total views is at 16 million and subscribers at 200,000
04:46 – Daisy does not have time to make new videos
05:16 – Daisy has outsourced content making
05:35 – Daisy never wanted to be a YouTube celebrity, she just wanted to be a trusted source for skin care
06:13 – Daisy used to spend 50 to 60 hours a week making her own video reviews
06:47 – Daisy says persistence played a role in her success
07:07 – Keep doing it and love what you are doing
07:56 – When you reach a certain number, collaboration with others is easier and you also get invited to different events to gain more exposure
08:16 – The first thousand subscribers was really hard
08:30 – Daisy took 5 years to reach a hundred thousand subscribers
08:49 – The community helped Daisy get her first thousand customers
09:30 – The next wave of customers was through reviews of influencers
10:10 – Look for people who are not big yet and build a relationship with them
10:33 – Figure out what your marketing channel is and do it day after day, after day…
10:44 – Daisy thinks she is good at spotting influencers
11:38 – Daisy looks at the engagement rates and if he or she is known for being sponsored by a big brand
12:06 – Daisy has a lot of repeat customers
12:20 – Have a good product and stick with it
12:25 – Learn the social media channels and where influencers are going
13:44 – What’s one big struggle you’ve faced while growing the business– Daisy needs to learn how to think bigger and how to NOT do it all
14:23 – Daisy says she needs to let go and let smarter people help her do her work
14:39 – What’s one big change you made in the last year that has impacted your life dramatically? – Daisy does not go the office as often as she has in the past and has learned to let people work autonomously
15:32 – Daisy does one-on-ones with managers once a week or every other week and it is consultative in nature, rather than her giving orders
16:12 – Daisy now works anywhere she wants and the company still runs smoothly even if she’s not physically present at the office
16:29 – Daisy has 3 or 4 number twos
16:51 – Daisy has also stopped developing friendships with her co-workers to separate work from her personal life
17:41 – In case she needs to make a difficult decision, Daisy wants to base it on the work rather than their relationship
18:00 – What’s one new tool that you’ve added in the last year that has added a lot of value to you? – Voice Messaging
18:37 – Eric also wants to start using voice messaging
19:42 – What’s one book that you’d recommend to everyone?– The E-Myth
20:20 – What’s one blog or podcast that you listen to everywhere? – Growth Everywhere
20:50 – Connect with Daisy thru her email
21:03 – End of today’s episode
3 Key Points:
If you can, establish credibility and trust before you even begin your company.
Persistence will eventually pay off.
Learn how to delegate tasks to people who are smarter than you.
Hey everyone, in today’s episode, I share the mic with Sol Orwell, the founder of Examine.com.
Listen as Sol shares how going from fat to fit led him to create a 7-figure nutrition business, how he built that business off of his Reddit followers, how Examine.com generates 100% of their revenue with just 3 products and why his quest for independence is the guiding principle to how he runs his companies.
01:20 – Sol is an immigrant who was born in Pakistan and has lived in Saudi Arabia, Japan, and USA—he is currently residing in Canada
01:49 – While in high school, Sol stumbled into virtual currency and MMO sales because of online gaming
02:14 – Sol also gained experience in domain names and local searches
02:53 – Examine.com was created because Sol gained weight and he wanted to analyze nutritional supplements
03:20 – Sol wants to make an impact on the world and share what he knows
04:03 – Examine.com’s focus today is how to generate consistent revenue and build their brand
04:20 – They are planning to have a product out this year
04:35 – Examine.com has been featured on many different media outlets
05:16 – The domain name is an asset and spending on it is a worthwhile risk
05:26 – When the site reached 10,000 visitors a day, Sol asked customers what they wanted and he responded
06:06 – Sol was able to build a subscription service and he connected with organizations that specialized in fitness and exercise
06:23 – Sol met his co-founders at Reddit and realized that people were always asking questions, but were not using the search function
07:04 – People were getting tired of answering the same questions and this is what caused Sol to build Examine.com
07:24 – Sol’s co-founder was 2013 Moderator of the Year
07:55 – Sol and his team announced in Reddit that they were building a site and people started linking to it
08:08 – Since they were already part of the Reddit community for a long time, people knew who they were and trusted them
09:37 – Content generation should NOT be the focus—it should be updating your own content and networking and building relationships
10:17 – It was easier to get people to link to them because of their strong community
10:57 – They are always pre-promoting
11:18 – What’s one big struggle you had in growing Examine.com? – People were cynical of who they were so they had to prove they were an authority
12:18 – Sol and his partner didn’t want the site to be about them, so they went with a generic brand
12:54 – Examine.com has researchers, editors/reviewers, copy editors and those who send the e-mails
13:26 – They do not work on rigid time schedules
14:03 – Examine.com also has doctors that they can consult
14:32 – How did you go about finding contractors? – Look for other people who are already doing the work, but who are unknown to others
15:13 – Sol looked for people who already have a site or a blog and are doing the research, but who may not necessarily have an audience
15:22 – Since they have already built their brand, people want to be associated with them
16:00 – Why the decision to start to move away from Examine.com? – I got into Examine.com because I needed to lose weight, but I am not the expert
16:57 – It has always been about finding the best people and providing them an opportunity
17:08 – Sol was able to move on from the projects because he has found people who are better than him
17:32 – When they were starting Sol’s partner, Kurtis, focused on the research while Sol did everything else
18:04 – Kamal is running Examine.com and he only met Sol after two years working on the site
18:38 – Sol pays others more than he pays himself and they become the face of the company
19:02 – Kamal is the face of the company and gets exposure everywhere
19:41 – Sol is currently working on speaking engagements, writing, and finding out ways to make an impact
20:12 – Sol wants to intercept social enterprise with entrepreneurship
21:19 – Sol wants to make a big impact and share the value of giving rather than the “me” approach
21:35 – For his speaking engagements, Sol talks about entrepreneurship
22:11 – In Mastermind Talks, you know who you are meeting with and the conversation is always about getting value
22:45 – There are also private invite-only events where you get to spend days with interesting people
23:31 – Doors open when you are more focused on meeting people rather than thinking about monetizing
24:15 – Eric got connected with Sol because of a conference that was recommended by Noah
24:40 – What’s one big change you made in the last year that’s impacted you or the business in a big way? – Sol uses a productivity journal and this helps him know what needs to be done the following week
This post originally appeared onSingle Grain, a growth marketing agency focused on scaling customer acquisition.
Creating a lucrative and scalable revenue model can be difficult, especially if you focus on the wrong end goals.
Brands often fail to generate a decent Return On Investment because they are too hung up on specific elements of their sales funnel. A preoccupation with certain types of conversions is just one of the reasons that your ROI can collapse.
Don’t Become Obsessed With Conversions
Andrew Bairdwrote an insightful LinkedIn post about the pitfalls of focusing too heavily on conversions. He asked a client for financial details, which apparently took the client by surprise.
“‘Why do you need to know my financials? Don’t you just need the conversion stats?’ the client asked.”
Baird pointed out that conversions themselves didn’t necessarily mean much if they failed to generate money. You can suffer a negative ROI if you are selling low-ticket items or can’t turn many of your leads into sales.
“Increasing conversions when every sale makes you very little (or loses you money!) won’t help,” Baird writes. “Equally if your conversions are at 75% [then] starting with conversions won’t give you the biggest bang for your efforts.”
Conversions are essential events in your revenue model. However, a specific conversion is useless if you view it as the ultimate end goal.
Do you know what your conversions are really worth? There’s no point in prioritizing them until you know, because determining the value of them is necessary to estimate your ROI.
It’s important to remember that most of your leads will never translate into sales. According to research from Marketing Sherpa, only 7% of leadsturn into paying customers. Of course, this is a rough estimate, and conversion rates vary by industry and company. But it shows that the vast majority of conversions never generate any revenue.
Here is the equation you must follow to calculate your lead value:
Lead Value = Lead Conversion Rate * Average Sale from a Conversion
ROI = Lead Value / Average Cost of Generating the Lead
The math behind this model is simple, but these equations can be difficult to apply in real-life situations. Remember that some leads will convert to sales more easily than others. Also, some leads are more likely to convert into higher-paying customers.
You need to understand how certain types of traffic convert and how many of those leads will turn into paying customers.
For example, let’s assume that you are setting up a Google AdWords campaign. You bid on one keyword for $0.40 a click and another for $0.30 a click. You might find that the conversion rate (possibly an e-mail opt-in) on your landing page is 20% for both of these keywords. However, the lead-to-sales rate is 10% for the first keyword but only 5% for the second keyword.
The average revenue from leads generated with the first keyword is $30 and $20 for the second keyword.
In this situation, you’re paying 33% more for every lead that you generate with the first keyword that you’re bidding on. However, you are generating three times as much revenue from each lead with that keyword. This means that your ROI is over 130% higher by bidding on the keyword with the higher CPC.
If you were focused exclusively on generating as many conversions as you could for the lowest possible cost, you would actually be generating a much lower ROI.
There are several reasons that a preoccupation with conversions can actually be counterproductive. Here are some issues that you need to be aware of:
Conversions are arbitrarily defined
You could consider any action that a user takes to be a conversion. Subscribing to an e-mail list, submitting a quote request, or simply visiting your website are all examples of conversions. Unfortunately, none of these actions by themselves yield revenue.
You could easily increase your conversions just by setting lower goals when defining conversions. For example, instead of counting quote requests, you could focus on the number of users that show any interest in one of your products (such as asking a question about the product).
You’ll probably have a higher number of conversions, but you haven’t improved the effectiveness of your marketing funnel.
Free Bonus Download: Get this handy checklist of 15 simple and actionable ways to increase the numbers in your sales funnel. Click here to download it free.
Lead quality varies
Some conversions are much more valuable than others. You might encourage 5,000 people to subscribe to your e-mail list, submit a quote request, or take some other action, but few of those leads will ever pan out. Your lead-to-sales conversion rate might be especially low if you make the following mistakes:
Relying on networks with low-quality traffic
Using landing pages that don’t appeal to the right demographic
Writing misleading ad copy that attracts people who don’t fit your buyer profile
Some brands are tempted to make these mistakes because they want to pad their conversion numbers. This can be particularly problematic if you’re relying on a marketing team that’s compensated based on the quantity rather than the quality of your leads. This is why many brands with affiliate programs compensate their affiliates for sales rather than leads.
Better Sales Funnel Planning
So, if you shouldn’t worry as much about your site’s specific conversion numbers, what should you put your energy into instead? The following suggestions will help you better create and optimize a fully-functioning funnel:
Determine which conversions matter most
As mentioned above, conversions are arbitrarily-defined concepts. If you truly want to make your sales funnel work effectively, you’ve got to isolate specific conversion cases and determine exactly which conversions mean the most for business.
Following the description above, opting in to an e-mail list, submitting a quote request or taking other actions (from downloading case studies to making sales) all constitute conversions. And if you focus exclusively on boosting conversions, you’d treat all these options equally, even though — from a business standpoint — they don’t all make an equal contribution to your bottom line.
The point of this article isn’t to convince you that tracking conversions is useless — far from it. The goal is to help you recognize that you need to be more exacting with your measurements. It’ll take some time and effort, but it’s crucial that you identify what a given conversion means to your business in terms of dollars and cents so that you can focus your marketing efforts on the conversion types that move the needle most.
Plan strong TOFU, MOFU and BOFU content
If you aren’t familiar with these acronyms, here’s a breakdown:
TOFU = Top of Funnel
MOFU = Middle of Funnel
BOFU = Bottom of Funnel
We aren’t just talking vegan protein sources here — we’re talking about the content that’s needed to guide website visitors through all stages of your buying process. Each piece of the puzzle is important, and yet TOFU and MOFU content is often set to the side in favor of a focus on conversion-driving bottom of funnel content.
Take a critical look at the content on your website. Can the pieces you’ve created be used to attract a larger audience, as good TOFU content can? Do they help visitors get familiar with the features and benefits of your product or service, as in the case of effective MOFU content? If you’re all about the CTAs and getting viewers to take that last step (BOFU), it may be time to build out your content strategy.
As you’re expanding your content approach, take a careful look at how you’re attributing your conversions. In that rush to drive conversions and figure out what contributed to them, many marketers give full attribution to the last touch — the final blog post that was read, the final CTA that encouraged action or some other far-down-the-funnel variable. And why wouldn’t they? It’s by far the simplest approach.
That said, it’s a woefully inaccurate way of assessing the value of each piece of the funnel. Instead of putting all your emphasis on encouraging and tracking conversions, give at least some of that energy to the process of investing in and implementing multi-touch attribution technology. Doing so becomes more essential every day in this omni-channel, omni-device world.
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Don’t Neglect Your Sales Funnel
Generating leads is essential if you want to earn sales down the road. However, even the most targeted leads don’t turn into customers on their own. You need to carefully nurture them before a sale is made.
If you want to have a workable sales funnel, then you must execute every step correctly. You need a strategy to engage your leads and encourage them to take the next step. This process can take months, so make sure you’re committed to your goals. Keep track of your leads, define how you acquired them, and split test different variables in your marketing funnel to make it as effective as possible.
Have you found that focusing too much on conversions has hurt your ROI? Feel free to share your comments below.