The ONLY Marketing Number that matters Ep 176

Summary Notes


In the Gym Secrets podcast, the speakers, including the host and a guest, discuss the intricacies of marketing for gym owners, emphasizing the importance of cost per acquisition (CPA) over other metrics like cost per lead. They highlight the necessity of understanding the full marketing funnel, from impressions and clicks through to the lifetime value (LTV) of a customer, stressing that the LTV to CPA ratio should be at least 3:1 based on gross margin. The conversation also covers common misconceptions and the pitfalls of focusing solely on upfront metrics such as clicks and leads without considering their quality or the cost of marketing services. They advocate for a deeper analysis of data, looking closely at revenue per show and close rates to truly assess the effectiveness of marketing campaigns.

Summary Notes

Introduction to Gym Secrets Podcast

  • The Gym Secrets podcast focuses on customer acquisition, maximizing customer value, and retention in the gym industry.
  • The podcast shares failures and lessons learned in the journey of running a gym.

To the Gym Secrets podcast, where we talk about how to get more customers, how to make more per customer, and how to keep them longer, and the many failures and lessons that we have learned along the way. I hope you enjoy and subscribe.

This quote sets the stage for the podcast's content, emphasizing the goal of helping gym owners grow their businesses through various strategies and sharing experiences.

Marketing Myths in Acquisition

  • Gym launch focuses heavily on customer acquisition, especially in 2020.
  • There's a need to dispel common myths about marketing metrics, such as the importance of cost per lead.
  • Cost per lead is often highlighted because it's at the top of the sales funnel, but it can be misleading.

I wanted to bring up something that's very important for marketing. All right, so gym launch has been focusing a lot on acquisition. We always have. But especially, I mean, 2020, that's our entire focus for our community who, what I wanted to do is dispel some of the myths.

Speaker B emphasizes the importance of focusing on the right marketing metrics and the intention to correct common misconceptions in the industry.

The Truth About Marketing Metrics

  • The primary metric that matters in marketing is the cost per acquisition (CPA).
  • Two secondary metrics are the upfront cash value and the lifetime value of a customer.
  • Agencies may mislead business owners by focusing on reduced cost per lead without considering overall marketing costs.

And so the only number that really marketing, sorry. That really matters in marketing from an acquisition standpoint is cost per acquisition.

Speaker B identifies cost per acquisition as the key metric for marketing success, highlighting its importance over other commonly discussed metrics.

Misleading Marketing Services

  • Marketing agencies may boast about reducing lead costs without accounting for their service fees.
  • An example is given where a marketing agency's fees increased the effective cost per lead when their fee was included.
  • This can result in a worse situation for the client despite the agency's claims of improvement.

They were getting solicited by a marketing agency and they were like, hey, we got so and so's lead cost from $30 a lead to $20 a lead, right? And they were marketing that as a really great outcome, which is great, whatever, right? But the point is that the cost for the marketing services was $2,000 a month.

Speaker B provides a real-world example to illustrate how marketing services can sometimes misrepresent their effectiveness by not including their fees in the cost per lead calculation.

Unpacking the Marketing Funnel

  • The marketing funnel starts with impressions, which are the cost per eyeball on the ad.
  • Clicks are the next step, with a focus on the unique click-through rate.
  • Unique clicks are important because they represent individual potential customers, as opposed to multiple clicks by the same person or bots.
  • Opt-ins and conversion rates on the page determine the number of leads generated.

From there, you have clicks, right? That's what people talk about. Ctr click through rate, especially unique click through rates, because that's what matters.

Speaker B breaks down the marketing funnel and explains the significance of unique click-through rates over simple click metrics.

Service-Based Business Metrics

  • Understanding key business metrics is crucial for service-based businesses.
  • Metrics include schedule rate, show rate, close rate, upfront revenue, and lifetime value (LTV).
  • The LTV to CAC (Customer Acquisition Cost) ratio is a vital measure of business health.
  • A ratio of three to one or higher is recommended for sustainability.
  • Higher profit businesses can achieve better ratios, often without including the LTV.

If you're doing appointments, which most service-based businesses that are listening to this are doing appointments of some sort, right? You have your schedule rate, and then you have your show rate, all right? And then after your show rate, you have your actual sale itself.

This quote outlines the customer journey in a service-based business, from scheduling an appointment to showing up and finally making a sale.

So how many people of the people who are walking in are actually getting closed? And then from that close, you have your upfront revenue, how much cash is collected upon the first transaction, and then the lifetime value, which is what you're expecting to collect over the life of the customer, right?

This quote emphasizes the importance of tracking the conversion rate from visitors to sales, as well as understanding both the immediate and long-term revenue from a customer.

You want to have a three to one or higher LTV CAC ratio, which means a lifetime value of the customer to the cost of acquisition.

This quote introduces the LTV to CAC ratio as a benchmark for assessing the cost-effectiveness of acquiring a customer relative to their value over time.

I like to be much, much higher that argins, on average, get five and a half to one on the front end, not even including the lifetime value.

This quote suggests that the speaker's business achieves a higher than average upfront LTV to CAC ratio, indicating efficient customer acquisition and strong initial sales.

Gross Margin and Lifetime Value Calculation

  • Gross margin is calculated after deducting hard costs from revenue.
  • The lifetime value is based on the gross margin multiplied by the number of repeat purchases.
  • Calculating LTV based on gross margin helps determine profitability and marketing campaign effectiveness.

If we know someone's going to make four of those $100 purchases, the lifetime value is not $400, but four times the $40 that's left over, which is going to be 160.

This quote explains how to calculate the lifetime value based on gross margin, rather than total revenue, to get a more accurate measure of profitability.

Importance of Customer Acquisition Cost (CAC)

  • CAC is the only marketing number that truly matters, according to the speaker.
  • Upfront cash and LTV are also considered to understand the full financial impact of acquiring a customer.
  • Different promotions might have varying CACs but can result in different cash flows and total values.

The only marketing number that matters is cost of acquisition.

This quote highlights the speaker's perspective that CAC is the most critical metric in marketing, as it directly relates to the business's ability to attract customers profitably.

Let's say it cost me $10 to acquire a customer that is worth, I don't know, let's say $40, right? Just for simple math. All right, now let's say I get zero of that money and I'm going to get that $40 over the next year.

This quote presents a scenario where the CAC is low, but the return on investment is spread over time, which may require additional capital to sustain the business.

Let's say it costs us, I don't know, $500 to acquire this customer, but we immediately get 1000 or 2000, and we know that this person is going to be worth ten on average, right?

This quote contrasts the previous scenario by presenting a higher CAC that yields immediate and significant upfront cash, demonstrating a different marketing strategy's financial implications.

Business Growth and

  • is a platform for business owners aiming to scale their businesses significantly.
  • The platform offers to engage with business owners to discuss growth strategies.

If you are a business owner that has a big old business and wants to get to a much bigger business, going to 5100 million dollars plus, we would love to talk to you.

This quote is an invitation for large-scale business owners to discuss growth opportunities with the platform.

You can apply anywhere on the page and talk to one of our team.

This quote provides a call-to-action for interested business owners to apply and initiate a conversation with the platform's team for potential collaboration.

Key Theme: Marketing Metrics and Lead Quality

  • Assessing the value of marketing efforts by examining cost per click (CPC) and lead quality.
  • The importance of distinguishing between different types of clicks, such as those from an attractive image versus a program explanation.
  • Understanding that more qualified clicks may be fewer but have a higher likelihood of converting into customers.
  • Evaluating the cost per schedule and cost per show to determine closer-to-home and valuable marketing metrics.
  • Considering the type of promotion being marketed, such as a 14-day free trial versus a 12-week transformation program, and how it affects the cost per show and customer acquisition.
  • Analyzing the ratio of marketing cost to cash up front and lifetime value of the customer to assess marketing effectiveness.
  • Encouraging deeper analysis beyond surface-level metrics like "$1 leads" to understand the true performance of a marketing campaign.
  • The importance of context when evaluating individual statistics and their relevance to the overall business model.

"We're getting one dollars clicks. For what? For what? Promotion. How do we know they're unique?"

This quote emphasizes the need to scrutinize the source and purpose of clicks in marketing, questioning their uniqueness and relevance to the promotion.

"Well, probably you coming to explaining your program to be more qualified click, there might be fewer of them, but the likelihood that that click becomes a customer is much higher."

This quote highlights the value of quality over quantity in clicks, suggesting that clicks resulting from an explanation of the program are more likely to convert into customers.

"Okay, well how much is my cost per schedule? All right, this is getting a little bit closer to home. This is becoming a little bit more interesting, a little bit more valuable, right."

This quote underscores the progression from basic metrics like CPC to more nuanced ones like cost per schedule, which provide more valuable insights for marketing analysis.

"But you might close a higher percentage of the people are coming in for twelve week and you might close about a higher average ticket."

The speaker points out that longer-term promotions may result in a higher conversion rate and average sale, affecting the evaluation of marketing effectiveness.

"The only objective I had for this entire piece of content is just think a little bit more beyond the headline when someone says, I'm getting one dollars leads."

This quote conveys the speaker's main message: to encourage deeper thinking about the meaning behind marketing metrics like "$1 leads."

Key Theme: Data Analysis and Business Improvement

  • The significance of deep dives into data for business and marketing improvement.
  • Acknowledging the complexity of data analysis due to the presence of numerous variables.
  • Recognizing that large data sets reveal more variables than small ones.
  • Understanding regional differences in customer behavior, such as appointment show-up rates.
  • Identifying counterintuitive findings in data and the need to reassess previously held beliefs.
  • The process of learning from extensive analysis of automated lead nurturing systems.

"I've done super deep dives into the data on the allen side of the shop, which is all the software that we have that automates lead nurture."

This quote reflects the speaker's intensive analysis of data from automated lead nurturing systems to improve business outcomes.

"When you see across large data sets, you have a lot more that come up."

The speaker acknowledges that analyzing large data sets can uncover a greater number of variables, complicating the analysis process.

"There's nothing you can do about it. You shouldn't really worry about it. But it's just something that is a data, it's a variable right?"

The speaker suggests that certain data points, like regional differences in behavior, are beyond control and should be recognized as variables rather than concerns.

"We started running ads with food, right? Because we're getting shitloads of clicks, right? And we were pushing them over to short squeeze pages, short opt in pages."

This quote describes an instance where the speaker's team used food ads to drive a high volume of clicks, leading to a reassessment of the approach based on data analysis.

Effectiveness of Short Opt-In Pages

  • Short opt-in pages generally outperform longer ones in terms of conversion.
  • However, the lead quality may vary significantly, affecting the conversion from a lead to an actual show.

"The thing is that short opt in pages tend to outperform. Longer opt in pages in general, not always."

This quote emphasizes the general trend that shorter opt-in pages have a higher conversion rate than longer ones, though there are exceptions.

Impact of Pre-Opt-In Content on Lead Quality

  • The content viewed before opting in can influence lead quality notably.
  • Detailed pre-opt-in content can lead to higher quality leads, with a potential three to five times increase in conversion to shows.

"The lead quality, as measured by throughput from the point of turning into a lead to turning into a show, can sometimes be three to five x higher based on what they saw before they opted in."

This quote highlights the significant impact of the content seen by potential leads before they opt in, suggesting that more informative content can lead to higher lead-to-show conversion rates.

Marketing Strategy Comparison Between Two Gyms

  • Differences in marketing strategies, even among similar businesses in similar markets, can lead to varied results.
  • The type of imagery and content used (e.g., food pictures, workout videos) can affect the number and quality of leads.

"But I'm seeing these massive differences between two gyms, even in similar markets, even running similar promotions."

This quote points out that despite similarities in market and promotions, marketing strategies can yield different results, stressing the importance of strategy over other factors.

Importance of Relevant and Informative Content

  • More detailed content on opt-in pages can lead to self-segmentation of leads, saving time and effort.
  • Opting for quality over quantity in leads can result in a more effective marketing campaign.

"The thing is, if you tell someone more about your program and then they choose not to opt in, that's a good thing."

This quote suggests that providing more information allows potential leads to self-filter, which is beneficial as it ensures that only interested individuals opt in, improving lead quality.

Measuring Marketing Success

  • Success should be measured by the ability to generate revenue per show, considering the close rate of leads.
  • Close examination of the promotion's effectiveness is necessary to evaluate the marketing strategy accurately.

"And so when you're making your marketing measure, what matters, measure and look as close as possible to the actual sale itself and how much revenue you're able to generate per show."

This quote advises that the ultimate measure of marketing success is the revenue generated per show, which considers the close rate and is a more accurate indicator of a campaign's effectiveness.

Marketing Metrics and Context

  • Consideration of cost of acquisition, immediate cash value, and lifetime value of the customer is crucial.
  • A 3:1 ratio of gross margin to total revenue collected is a key metric for assessing marketing campaigns.

"Take into account the three big metrics. One is cost of acquisition, which is always going to be king. And then the two submetrics, which is going to be immediate cash value and lifetime value of the customer."

This quote outlines the three essential metrics for evaluating marketing effectiveness: cost of acquisition, immediate cash value, and lifetime value of the customer. It also stresses the importance of maintaining a 3:1 ratio for gross margin relative to total revenue.

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