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Cost-per-Lead/ROI Model Help

Market Size and the "Waste Problem"

Estimating and eliminating waste in a marketing program is one of the most important things to do if you want to maximize your Marketing ROI. And while the rationale is obvious, most marketers choose not to do it. This is because most people focus on the idealized prospect within the population. And they assume that waste is just a cost of doing business.

Eliminating waste can also be a bit challenging to do. So most people just figure that the cost of eliminating waste isn't worth the benefit, and move on. But given the options available for today's marketers, nothing could be further from the truth.

Let's look at the two ratios below to understand why.

Let's assume that there are 10 companies who will buy your product. (We have a crystal ball with which we can see the future.) The problem is that they're hidden somewhere in a population that includes a lot of other companies, as shown in the "inefficient" ratio. That population may be in the form of a commercial database or email list. It may be in the form of Internet Search users. It may be in the form of your list of LinkedIn contacts, visitors to a Web site, or members of a networking group. It may even be in the form of attendees at a trade show. You pick the list and the size of the population you're going to target with your marketing dollars; but for illustration purposes, let's just say that it has 100,000 names.

You now have to pick a promotional technique to reach these 10 companies, because those or the only ones you really want to get to. And here's where it gets tricky: In spite of the large number of options available today, waste is a fundamentally limiting factor in every one of them. That is, while there are dozens of promotional venues, every one of them incurs some waste. For example:
  • With Internet advertising you're showing your ad to many people who have no need for your product; yet you pay on the basis of exposures.
  • With Pay-per-Click you're paying for clicks of visitors who hit your site by mistake, as well as competitors who want to waste your money.
  • With email marketing, you're paying for bad names, non-deliverables, and inevitable shunts to the spam folder.
  • With trade shows you're paying for attendees who don't stop in your booth.
  • With networking you're basically paying for the opportunity to have someone try to sell to you.
  • With telemarketing you're paying for dials to companies that don't have an application.
  • And so on with content marketing, SEO, billboards, radio, TV and everything else. Every medium has waste.
And so the issue then becomes: if you can avoid promoting your product to people and companies who aren't going to buy, you can potentially improve your ROI - depending, of course, on what it would cost you to avoid promoting your product to people and companies who aren't going to buy.

That's the point of the model.


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