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Page 109 GO IT ALONE!
- The number of people that visit the Web site offering the service
My marketing cost to bring a potential prospect to the site (my cost per potential lead) My conversion rate at the site (the percentage of people who fill out the on-site form and ask for quotes as compared to the total number of visitors) My conversion rate of prospects submitted to companies (the percentage of submitted leads that actually results in broadband purchases for which I am compensated) The average compensation I receive for each sale (my average value of a sold customer) With these five metrics, I can in fact reduce the business to a simple mathematical formula. What’s important here is that each of these areas provides a window into how I can influence the profits of the business. Two obvious places that influence profits are items 1 and 5 (basic costs and basic compensation). However, it’s often the less obvious—but equally important—leverage points—that are frequently the sources of business success. If I want to double the profits of the business, I have a range of options. Items 1 and 5 suggest that I can attempt to lower my basic marketing costs by one-half (which, in an optimized system, is likely to be hard) or I can negotiate with my affiliated broadband providers to double my compensation (which sounds like a tough sell). Alternatively, I can look at some of the internal measures of how the business is functioning. For example, if 5% of the visitors to the site decide to sign up for the service, my profits also double if I can raise this number to 10% (assuming they are prospects of the same quality). Doubling this conversion rate has exactly the same impact on profits as cutting my marketing costs in half. I am now paying only 50% of what I was previously paying for a lead that is submitted to a telecommunications
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GO IT ALONE! Copyright 2004 by Bruce Judson. Reprinted by permission of HarperCollins Publishers. All rights reserved.
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