Have you noticed a TON of ads from Facebook ad agencies offering to get you “cheap leads”?
Based on all the noise you’d think the secret to a thriving online business was filling your CRM with 20¢ email addresses.
Here’s the thing…
Cheap leads are easy.
Seriously, here’s how to pay rock-bottom prices for leads:
- Write ad copy that makes a broad and enormous promise that no lead magnet could ever reasonably deliver on.
- Remove all barriers to signing up and make sure everyone thinks what you have to offer is for them.
- Bonus points: Target your ad towards countries with a much lower cost of living than the US/UK/CA.
- Extra bonus points: Just run a giveaway instead and make the prize something totally unrelated to your business, like a free iPad.
Do all of these and I can almost guarantee you’ll have people signing up in droves.
The problem is… I bet very few (if any) of those leads will become customers and clients.
Heres why lead cost alone is a misleading metric:
Facebook’s gotten much better at targeting over the years.
They know who the “valuable” people are on their platform. The people who’ve bought recently and are most likely to take the action you want (whether that’s buying a shoe, attending a webinar, etc).
And because Facebook has this dialed in, they’re going to charge you more to reach those people (Facebook charges based on “CPM”).
The CPM can have a big affect on how much you pay per lead. But paying higher CPMs isn’t always a bad thing.
If you have a great, compliant ad, the higher cost might mean Facebook is putting you in front of higher quality people – the ones everyone else wants to reach too because they take action and buy.
What happens when you focus on cheap leads:
Here’s the thing…
There are plenty of ways to get cheap leads. But that shouldn’t be your main goal.
Because when you focus on cheap leads as your north star, here are the second-order affects that usually happen:
- Few of your new leads care about what you do and rarely open any of your emails
- Even if they do, your lead magnet fails to deliver on its promise and they unsubscribe (or worse, they tune you out)
- The lack of engagement hurts your email reputation with the major email services like Google and Yahoo.
- Your emails get sent to Spam or the Promotions Tab, even for the few leads who do want to hear from you
- Your email list grows, but your open rates get stuck at 5% or lower
- Other people keep saying how email is their most profitable source of sales, but you don’t have that experience
Here’s how this played out recently with one of my clients.
We had an evergreen webinar funnel bringing in about 2000 subscribers per month, averaging $3/registrant with Facebook ads.
But it’s a smaller niche market, so scaling becomes tricky. As you expand beyond the core of “perfect fit” people, costs tend to rise. Cost per webinar registrant was going up towards $5.
So we wanted to see if we could add in a lead magnet in front of the webinar.
The thinking was that we’d be bringing in more leads at a cheaper cost (tends to be the case with lead magnets vs. webinars). But that we’d get around the same cost per registration even with the extra step.
And that’s exactly what happened.
But here’s where we ran into trouble…
Although all the other stats remained about the same (cost per registration, attendance rate, etc)…
Our “take rate” (the % of people who buy) went way down.
So even though our new subscriber cost went down from $4 to $1…
Our take rate for webinar attendees went from 4% to 0.4%.
So we were effectively getting 4x the amount of leads for the same ad spend… but we weren’t bringing in enough buyers.
And a campaign like that becomes impossible to scale. Because the ads aren’t paying for themselves in a reasonable time frame. And for many small online businesses, that’s just not going to work.
So the next time you hear all the hoopla about super cheap leads, be wary. Sometimes it’s good to pay more and grow your list with the right people.