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How can I break into marketing?

How can pay-for-performance solutions break the marketing budget cycle?

  • If your marketing solution charges a percentage of sales CPA, say 10%, rather than an upfront fee/CPM/CPC, how can you get marketeers to get past the "I only have $10k to spend" budget-infused mentality and see that the returns are guaranteed and should be cranked?

  • Answer:

    Even if you are doing CPA, it's not just a budget that causes there to be a limit on spend. Understanding these key issues will help you address them. The reason is that even after the conversion, there's a significant amount of risk for the buyer of a lead or purchase or other conversion. These risks end up dependent on what marketing channel they're buying from, so as a result, marketers will be shy on new channels. Here's why: Chargebacks and fraud can vary by channel Even after the customer buys, they may have a different profile on the % of chargebacks or fraud that happens. So for the marketer, the only way to understand this, ultimately, is to buy some customers from a channel and see how the % shakes out after a few months. Lead quality can vary by channel If you are working with a marketer who is buying a lead and usually assigns it a value of $10, then that marketer has calculated that # based on an entire funnel based on historical data. If they are working with you for the first time, they have no idea how close you'd get to $10. If you're giving incentivized traffic, or international, or otherwise, it may lead to worse numbers. Again, they'd have a wait-and-see attitude. LTV and cancelation rates can vary by channel For subscription services, the only way that a marketer is able to offer bounties in the $10s of dollars is because they are paying a significant % of the LTV upfront. How do they know that you won't provide customers that have higher cancelation rates, prefer lower-tier plans, or otherwise? The only way for them to see is to wait it out - unfortunately to calculate an updated LTV, they might need several months of track record because they can calculate thew curve.

Andrew Chen at Quora Visit the source

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Other answers

Both Ben and Andrew hit the nail on the head. It is extremely important to understand the revenue stream that your affiliate is providing you. Like Andrew mentioned, chargebacks can be a killer. Don't get too catch up in the initial revenue from the sale because it is better to have 100 recurring customers than 1000 1-time customers. Your goal should be to win long term customers, not just easy ones. If you can determine an accurate Revenue per Sale (RPS) for each affiliate you are working with, this gives you a lot of power. This allows you to segment your affiliates by RPS; make proper judgement on how much marketing dollars to allocate towards specific affiliates or channels; and to negotiate proper CPA terms to ensure long term profitability. Summary: Not all sales are alike. Understand the RPS you are getting from your affiliates before you invest heavily into any specific affiliate or channel.

Ipalibo Da-Wariboko

Breaking the marketing budget cycle with performance lead generation typically is a function of scale. Meaning, your clients will scale their budgets based upon their return. I've worked with clients who started with a negligible ad spend, but quickly scaled to 10k per week. In my experience scaling ad spend is purely dependent upon performance - at the sales level. Show clients results and they will show you the money

Lawrence Black

I agree with Andrew. Work with your client to understand the true ROI after persistency and LTV are calculated, then you can determine the CPA which is sustainable or allowable.

Ben Levy

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