Hackernoon logoROI Versus Ad Spend by@cwasylishen

ROI Versus Ad Spend

If you expect to attract $10,000 customers with $1 clicks, you are probably looking in the wrong place. How much is too much depends entirely on what it is that you are selling, what it costs, and what your end goal is. If you attract ten $1,000 clients at a cost of $800 each, your net profit is only $2,000, but it’s a positive ROI, so we are good. You have to consider lifetime value of a client, and the average stay for your $10K VIP could be five years.
Clinton Wasylishen Hacker Noon profile picture

@cwasylishenClinton Wasylishen

Founder

I was asked today by a colleague a simple question:

“How do you know how much is reasonable to spend per click?”

The answer to that question is both simple and not…. here was my answer, more or less:

You want to spend as much as possible on your marketing, bearing in mind your end goal. If you expect to attract $10,000 customers with $1 clicks, you are probably looking in the wrong place.

So the question remains — how much is too much?

This depends entirely on what it is that you are selling, what it costs, and what your end goal is.

Say you have a $1,000 program, and you are selling it direct to consumers, but your end goal is a $10,000/year mastermind group.

You could spend up to $1,000/client to acquire and be well ahead of the game.

Let’s use this example:

$1,000 program

$10,000 VIP mastermind

If you attract ten $1,000 clients at a cost of $800 each, your net profit is only $2,000, but it’s a positive ROI, so we are good.

If you convert HALF of your $1,000 clients to $10,000 VIPs then you have $50,000 (VIP) + $10,000 (original program revenue) less $8,000 in marketing costs, ,for a net of $52,000 — this is a 650% ROI.

That’s what we would call a good investment.

What happens very often, however is that the entrepreneur will focus ONLY on the spend, not the return or end goal.

Also — when considering ROI, you have to consider lifetime value of a client. For instance — the above example, the average stay for your $10K VIP could be five years (just a guess).

If that’s the case, then you have $252,000 in revenue on an $8,000 investment… which is even better.

So — given you, and your customer’s lifetime value, what is a “smart” cost per click?

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