Today, I had an interesting conversation with a potential client. He found my website online and was looking for a consultant. We started the conversation and he was telling me about how his current pay per click marketing company is not doing satisfactory work. In fact, from what he was told me, they were awful. He ended up taking over the campaign, and with no prior knowledge of internet marketing, he was able to achieve lower advertising costs than this supposed internet marketing company.
I poked a little further into his business and asked him some questions like, "are they using landing pages as a bridge to bring people to their website? Are they tracking conversions? etc."
I then went and asked him a stumper of a question. I asked, "how much does it cost you to acquire a new customer?" There was a long pause and he said, "You know I don't know. It used to cost me $150 a lead, and sometimes I would see them come in for $60. A $30 lead is better than a $90 one right?"
I said, "Leads don't pay your bills and customers do. How much it is costing you to get a new customer?" He said he really didn't know.
So before we talked more, I gave him was a little homework to do. He's going to go back 6 months and analyze his marketing efforts, and he is going to find out how many customers he brought in over that period of time. Then he'll finally know the number that really matters, how much it is costing hom to get a new customer.
Measuring Cost Per Lead Is Giving You Incomplete Data
There's a big myth that I'm going to dispel about internet marketing. When a company reports to you the activity they've been doing, whether it's pay per click, SEO, email marketing, or anything else for your senior living community, they will tout how many clicks they brought you, how many impressions your site saw, the cost per click, and then tell you the cost per senior living lead is $X and that is a great number.
That great cost per lead they are telling you can actually be very expensive. What really matters is how much it costs your senior living community to acquire a new resident. You may only be paying $45 per lead from your pay per click campaign, or be paying $100 for a lead from a referral directory, but what matters to your community as a business is how much it costs to convert those into residents.
Let's look at an example. Say you are paying $45 for senior living pay per click leads, but it takes 50 of those to get a new resident. In this case it is costing you $45×50=$2,250 per new senior living resident. Now consider having to pay $12,000 for a newspaper ad, and that brings in 7 new residents. $12,000/7=$1,714. Finding out these numbers lets you discover your senior living resident gumball machine. You want a new resident, then drop $2,250 on pay per click ads, and out pops a new resident.
More importantly in the above example, you found out the newspaper ad is actually $536 cheaper to acquire a new customer! If it continues to produce at these numbers, then you would want to allocate more resources to the newspaper ad then the pay per click ad. (Note: This is just an example to illustrate my point)
So you now know it takes $1,714 to get a new senior living resident through your newspaper ads. And let's say it keeps this average for a few months or running. Considering the lifetime value of a resident can be multiple $10,000's, then that's a gumball machine I would like to have and would gladly pay $1,714 for a new resident.
This is why it's critical to track all your marketing efforts. Especially with internet marketing because there's so many ways to attract new residents online. If you're not tracking your numbers, then you don't know where to correctly allocate your resources.
When we setup a client with a new marketing campaigns, we track everything. If we're advertising on Google, Yahoo, and Bing, then each medium (search engine in this case) will get it's own unique phone number and tracking code. This way we know how many leads each medium is producing. On top of this we've developed an ROI console to report how much a new resident costs, the lifetime value of each resident and other important ROI numbers.
I hope this posts challenges what you currently measure and inspires you to determine how much it's actually costing your senior living community to get a new resident.