Ryan Shank explains why chasing volume wastes money. Focus on cost-per-sale instead of cost-per-lead, and track day-90 retention to find real customers. Tight alignment between marketing, sales, and customer success turns fewer, better leads into lower acquisition costs.
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What up guys, it's Ryan Shank from PhoneWagon. Day 22. Hope everyone is having an amazing day. Today we have some regular local Den coffee. It is snowing here in New York City, so a lot of people are working from home today. I am working from the home office as well, but we are taking care of customers, doing everything we can today. So what I want to talk about today is the importance of lead quality. Okay, I think a lot of times people are very, very focused on acquiring leads and then kind of like being able to sell to those leads, but there is a problem. Obviously, if you acquire the wrong type of leads or the wrong quality of leads, then you're not going to be able to close them. And what is going to happen is you're going to spend a lot more effort trying to, to work those leads, get them to close, and can, you know, convince them to close. But they— there could be a couple things wrong. One, they could be the wrong— it could be a bad fit, okay. They might, so for instance with PhoneWagon, PhoneWagon is a good fit for businesses that are doing some type of advertising and it's best fit for businesses that are doing marketing in more than one channel. If you're only doing one channel, typically it's, you can tell if it's effective or not, right, if there's only one channel. Sorry, I just turned the music off. However, if you're doing, you know, multiple channels, then PhoneWagon is an amazing fit, okay. So that's it for us in terms of like customer type and acquiring leads that are, you know, for instance, if you're a brand new business and you're just now starting, or you're a freelancer or something, it might not make the most sense to be using, you know, call tracking to see if, if your marketing channels are generating different phone calls or not. Because one, you're probably not getting a lot of phone calls, and two, you're probably gonna be able to attribute them to the one thing that you are doing, maybe, right? In other businesses, you might, you know, for instance, if you're like a remodeling company or you're a housing company or something like that, one, budget is definitely gonna be a thing, right? That if you only build custom million-dollar houses and someone comes to you that, you know, makes $40,000 a year, one, they're not going to be able to qualify for a mortgage that could even get them to purchase your product, your house, right? And, and even if they could qualify, they probably don't have the down payment to make and they probably just can't— it's probably just out of budget. So budget's going to be an important thing for qualifying leads and things like that. The other thing is going to just be kind of like feature-wise, product fit-wise, like do they need it? Is it, is it really a good fit for their business? Trying to think, you know, for instance, if you're, uh, again, I kind of go back to this example, but if you're a cosmetic surgeon and, you know, someone doesn't have— I guess no one has a need necessarily for cosmetic surgery, although I guess there, there probably is some types. But, um, if, uh, if you don't want it, so then, then what you can do is then it could be like an education play where you're gonna like, you know, send them a lot of materials and why they want to do certain procedures or whatever it is. But, um, main point is that if you're, you're acquiring a lot of leads— so a lot of times, you know, when I'll be in discussions with people, all they talk about is their cost per lead, cost per lead, cost per lead, but you should actually manage to a cost per sale because look, if I'm acquiring 100 leads but 3 of them convert to a paying customer, I mean, I have a 3% conversion rate from lead to customer. However, and maybe those 100 leads are cheap, so that's kind of their vanity metric that they like to focus on, but if I'm able to qualify, you know, if I'm able to generate 30 leads, right, but, you know, 10 of them convert to customers, I mean, that's amazing, 33% close rate. I'm spending less energy, less effort for more results, more output. That is gonna be something that I would rather focus on a lot, and then I'm managing to a cost per sale. So maybe those 30 leads cost me $10 each, right? But now I'm closing, you know, 10 of the 30. So what is that, $300 for 10, you know, so it's basically like $30 per sale versus the person who's acquiring 100 leads, even if they're acquiring 100 leads for, what, call it, you know, $5 a lead. So in theory, they're acquiring all these leads for half the price, but they're only closing 3 of them, so now they're paying, you know, $500 for 3 sales. And whatever that math is, it's over $100 per sale. It's obviously a lot less than my $30 per sale. So you should always be managing to a cost per sale instead of just a cost per lead, 'cause obviously leads are the first, they're the top of the funnel, but at the end of the day you want to one, close the customer and get a paying customer, and then you wanna see what the retention curve looks like. So the other thing that I like to look at is retention at day 90, 'cause I think within first 30 days, one, you might get a little bit of churn, maybe it was a bad customer, it was a bad fit, I actually don't consider them a real customer until after they've renewed for the second month. A lot of times people are in sort of either stated or an arbitrary money-back guarantee period. And then after that, you know, 60 days, they're starting to use it. After day 90, they've renewed now 3 times. I like to see kind of what that retention looks like at that day point. And then you can sort of manage and monitor the retention curve after that. So, and I think the marketing people should also be looped into sales. And this is where, you know, the Book Scrum comes in. A little bit all over the place right now, but this is where you start to tie in your team. So marketing is generating the leads, sales is kind of closing out the leads, and then, you know, customer success is going to be then onboarding, implementing, and retaining the customers. But I think everyone should be checks and balances for each other because, for instance, right now I have a, you know, marketing team that we're bringing on. You know, they want to hit their cost per lead, but I really want to— my checks is going to be, hey, well, what is the conversion rate? What is the cost per sale from these leads that you're generating? And then what are we retaining? So all of that ties in. But first step, and the point of this video is going to be managing to, or just acquiring quality leads, okay? So hope everyone has an amazing Tuesday. Stay warm out there, and we'll see you guys tomorrow.
