I recently had a subscriber connect with me on Facebook trying to get me to buy a Clickbank offer he is promoting. After striking up a conversation with him, I got him to open up a bit about what he was doing…
This guy has been marketing a Clickbank offer online for the past 14 months… and he has yet to make a profit.
He’s made quite a few sales (256), but always ends up with less money at the end of every month.
The commission on the offer he’s marketing is $42, but when I asked him what his customer acquisition cost was…. his reply was “Uh… my what?”
Let me explain why that is a HUGE PROBLEM…
After looking at his numbers for the past few months… here’s where he’s at (I knew right from the start, this was going to make a great case study):
Cost to acquire a sale: $71.26
Commission on a sale: $42.00
Refund rate on offer: 9.4% (almost 1 out of 10 refunds the product)
With 256 sales…
Commissions received (adjusted for refunds): $9,742
Marketing costs: $18,242
Bottom Line: Net LOSS $8,500 (or -$600/mo)
The sad thing is that he’s been running at these numbers for months… and he’s not alone…
I see people doing this exact thing all the time… counting their commissions as if customers were free!
Common sense would say that you cannot spend more than you make, right?
Yet in the internet marketing arena… the above scenario is more common than not.
Please don’t misunderstand what I’m saying here… When you first start, it is perfectly normal to operate at a loss while you make small adjustments to your marketing to bring either your acquisition cost down, or your lifetime customer value up… to maximize profits. That’s how it’s done!
The problem is that most marketers are not even looking at their metrics and have no idea where to make adjustments… they just keep doing the same thing until they go broke… not understanding the necessity to really learn effective marketing.
This is not limited to the affiliate marketing arena… I spent several years as a small business marketing consultant and this scenario extends into every area of business. I cannot tell you how many traditional business owners (insurance, massage, mortgage, etc.) I have spoken with that were spending thousands per year on yellow page ads and other paid placements, yet had no idea how many customers (if any) had actually come from those sources.
In business… Ignorance Is NOT Bliss!
In my years in the network marketing industry I’ve seen first hand how this runs rampant here as well… most people in a network marketing opportunity really have no idea what their real lifetime customer value is, let alone how many active customers it will take for them to reach their goal of a full time income.
So many people just aimlessly throw money around in the name of marketing with the hopes it will net them sales… and you can pretty much guarantee that if that’s your “M.O.” …you’re headed for disaster.
…And by the way.. If you’re one of those network marketers that doesn’t “do paid advertising” and you’re saying to yourself.. “but my customers ARE free.”, yet you’re spending money on business cards, marketing DVDs / CDs, give-away books, drop cards, weekly meetings, super saturday events, gas, etc… what do you think that is?
When you add up all those costs and your time and equate that to the 2-5 new reps (if that) you’ve brought on in the last few months… you begin to see your acquisition cost.
If you want to run a profitable business, at some point you have to stand up and DECIDE you’re going to take this seriously and stop treating it like some little thing you’re doing as a side hobby until you can’t afford it anymore.
The reality is that this stuff is really not that hard… you can learn to track every aspect of your business, track every traffic source independently… know exactly where your customers are coming from and how to make a lot more money per customer… But… you have to be willing to invest in your education, learn and develop new skills.. and BECOME A PROFESSIONAL!
This may sound intimidating to someone that has no clue how to do that, but today technology allows us to leverage systems to do most of this for us… it’s just a matter of learning what to use, and how to use it.
Learn marketing… or go broke!
To Your Success!
~ Jon Ochs
P.S. See what I and my team are doing that allows us to have incredible cash-flow, create a $3,000+/mo income with your first 25 customers and create an extremely high lifetime customer value… all while learning to leverage proven marketing strategies and systems. …Just click here and take 15 minutes to watch this video!