Cost Per What? A Marketing Tale of Horror

Mo Money, Mo Questions

Part of a continuing series of moments from my career, in which great breakthroughs came from great setbacks. The point, as always, is to work away from fear, and learn from every mistake. Besides, they make for better stories.

When you work in the Wild West, otherwise known as the first 15-odd years of Web start ups, you really can not complain when the outlaws run through town and shoot the place up. You chose to try to make a living in frontier times for the possible gold rush gains. Risk is part of the landscape.

A moment of risk not working out hit me at the end of the last Horror column, when a billionaire decided to avoid the second round of promised funding, and my fun time marketing job evaporated without warning or severance. Which brought me, less than a month later, to another Sili Valley office in another interview session, where the gig was to oversee lead generation for a SaaS provider with some genius code under the hood.

Well, sure. Game on. The interview starts and is going well, with lots of good back and forth, and they are impressed by what I'm bringing to the table. So we turn to that portion of the program where the interviewer asks if you have any questions, and well, you want me to execute a program. I've got questions.

"What's your cost per lead?"

"Cost per... yeah. That's exactly the sort of thing we're hoping you can tell us."

To my credit, I kept my jaw off the floor and my head off the desk, mostly by just concentrating on my notes and writing this down as if it weren't terrifying. But hey, you are engineering geniuses. Let's just move on.

"What's your marketing budget?"

"Two million."

Phew. OK, it's B2B and SaaS, so that might not spend as far as you like, but I can work with...

"We've spent $1.8 million already."

Whoops. Well, it's mid-September when this interview is happening, so I've got 90 days to figure out your cost per lead and then get things moving in Q1...

"And our fiscal year starts on April 1."

April Fools! Wow, you guys really had me go... nope, not a joke.

Long story short... I wound up taking the gig anyway, mostly because the engineering really was best in class, the business looked highly scalable, and the value of the product was just breakthrough. It was basically a Cloud solution, only a dozen years before anyone knew what that was. Besides, I needed a gig, and the pay was good.

What happened next? Well, a neglected telemarketing team turned out to be a source of strength with a better script. A modest postcard campaign showed wins after brainstorming helped to produce a new control message. Educational webinars took the fear out of what we were proposing as a solution, and helped cut down the length of the funnel. Some delicate tap dancing with print advertisers got us some writedowns to free up other funds. The cost per lead was determined, and quickly cut by over 60%.

Lessons learned?

1) A lack of measurement is a wealth of opportunity.

As soon as you can start putting data on aspects of your program, you can start taking the emotion out of decisions, and the simple act of measuring will get you past a lot of poor ideas. It turns out that a good chunk of the budget was going to highway signs and radio spots. Which leads us to...

2) The wrong money will get you killed.

You will be shocked, shocked, to learn that premium marketing plays in outdoor and radio for a tech start-up with no brand equity, with a SaaS product that might only apply to 1 out of every 10,000 drivers, do not drive a great cost per lead. Why did they do it in the first place? Because a powerful board member wanted to be just like our biggest competitor, who was sitting on a quarter billion in post-IPO cash, and trying to impress the investing community with these spends. More about that later.

3) You can always negotiate, or, at least, try to.

With 90% of my budget locked down and six months to go before the end of the fiscal year, it looked like I had no options during ramp up. But it turned out that my employer had been paying full rate card, so simply going to their longtime partners and letting them know that, at the very least, that wasn't going to continue, led to some knowing chuckles and good-faith writedowns. If you don't ask, you don't get.

4) To avoid looking like you are bleeding edge, use old school methods.

We had aspects of the program that were far more techie than postcards, telemarketing and a webinar, and our SaaS product was ideally targeted to CTOs, as it was a very advanced platform and approach. Grounding the product in traditional pieces took the fear of bleeding edge out of the offer, and helped to shorten the funnel. Changing the copy to be more about benefits, and less about technical separation from competitors, also helped make lead gen more efficient.

At this point, you might be asking... where's the Horror? I promised you Horror, right up there in the header. And here it is...

5) If you smell too much smoke, you might be too late to stop the fire.

After 90 days, we had upgraded the control work, dramatically increased the participant count on webinars, driven dozens of high quality leads, identified the cost per lead, and then cut that number by over 60%. I was fired up by what we were doing, and so was everyone on the team. There was still a lot to fix, but we were making good progress.

Then, the board cut the funding for the company, and we were all looking for work. At Christmas, without severance. It was a very interesting year, really.

Why did the ax fall? Because our competitor was just deemed as too dominant, and the determination was made that it was better to take a tax write off than risk being just a break-even also-ran.

It didn't make sense to me then or now, but then again, neither does not knowing your cost per lead. It's not like I didn't have fair warning.

The Wild, Wild Web, folks! It's not for the faint of heart. But I did learn a lot, and hopefully, you have now as well.

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You've read this far, so feel free to connect with me on LinkedIn. I also welcome email to davidlmountain at gmail dot com, or you can use the top right form on this page. 

In addition to copywriting, direction and strategy, we also provide design, illustration, photography, coding and hosting. Tell us what you need done, and your budget, and we'll work out an RFP. I also welcome email at davidlmountain at gmail dot com.