3 Examples of Reduced CPA and Increased LTV

1. Strategic Alliance

It was 2010 and I was launching an education company that provided continuing professional development.

I could have tried to advertise directly to the individual professionals in my target audience, but instead I contacted a company who had a database of members in my target audience.

This company sold medical supplies and was looking for a way to provide extra value to their customers.

The CEO was well known in the industry, and so I offered to pay him a fee to present a webinar that we would host and promote widely.

In this way, his existing customers could attend a free webinar and he and his company would receive free promotion outside of his customer base.

I offered $500 for him to do a presentation from the comfort of his home office, and he accepted.

I then contacted a number of professional associations in different countries whose members would be ideal clients for us, as well as ideal clients for the CEOs medical supply business.

I explained that we would offer their members a free webinar that would provide continuing professional development points, and that they could put their logo on the webinar, demonstrating the added value that they were bringing to their members.

I also offered to write the emails that they would send to their members, to save them time.

They readily accepted.

Four weeks later I had just over 3,500 people signup to my email list to attend this free webinar.  The only expense related to this promotion was the $500 I paid the presenter.

I estimated it cost $0.14 per lead.

With around 3,500 people on our email list, I made them an offer for the continuing professional development program.

It crushed. The program was $297 and the cost per sale was $4.48

I subsequently used that same email list over and over again for promotions and various offers, increasing the LTV over time. And it all came from strategic alliances and a $500 presenters fee.

2. Organic Social Media

I used to post a lot on social media ... and then took a break and deleted Facebook from my phone.

About a year later, when I went back on again, I found that I'd post and get very little engagement.

Maybe I was just crap at writing posts that were interesting or relevant?

In anycase, I continued to post what was on my mind ... sharing an insight here ... a contrarian point of view there ... and mostly just documenting my life and family.

I had an idea for a new $5,000 program for entrepreneurs, called the X10 Entrepreneur Intensive, and I didn't want to run paid ads to it before I'd had a few people go through it.

The idea was that I'd run the program and show people what I could help them with, and then because of that, a few would want ongoing help and would join me as a long term consulting client.

So, instead of building a funnel and testing and running ads ... I decided to just write about it on Facebook.

I shared a number of posts, teaching some of the content of the program over about two weeks, and at the end of the post I'd just write: 

"If you liked this and are interested in learning more, I have a program coming up. Just send me a DM and I'll send it over"

Over that two week period, a few of the same people started liking and commenting on my posts ... and then one by one, they started reaching out to me in messenger.

Within two weeks I had 6 people doing my 5K program.

The cost to acquire a client in this case was $0, and just a little of my time.

All of them became long term clients with increasing LTV.

3. Paid Advertising

One of the most commonly taught approaches to online business is to use paid ads to create awareness first, then engagement, then generate leads, and then finally sell something to those leads and make a sale.

This can be costly, because you're paying to advertise to these same folks multiple times.

We got pretty good at this and in 2019 generated about 1.9 million in revenue using this approach (400 sales at $4,764 each).

But all is not as it seems, because $1.9 million in revenue doesn't go very far when it costs about $1,400 per sale in advertising costs, $1,000 per sale in commissions, then there's the payroll ... and then dividing what's left between business partners.

This system was broke.

In my never ending effort to find ways to optimise profit, I met an advertiser that was doing things differently and getting remarkably different results.

Instead of paying for awareness, engagement, and lead generation ... he was able to go straight to a sale from an ad, and make it immediately profitable.

While we were paying around $7 to $10 to get someone to signup for a free webinar, he was selling a short course directly from an ad for $9, and making $5 profit.

In other words, it was costing him $4 to make a $9 sale, leaving a $5 profit ... and then, he would invite those people who purchased the $9 course to a free webinar and some of them would purchase his $2,000 course. 

The CPA for the course was $0.  In fact, he was in $5 profit for every single person who joined his email list.  

And in addition to that, he didn't have an email list full of people who had signed up for a free webinar. Instead, he had an email list full of people who had paid him $9 to start with.

So, how did I change my online strategy at that time?

Well, for starters, staying in a partnership that wasn't working didn't make sense to anyone, so I started a new business where I was behind the scenes.

Instead of doing lead generation and giving away a free eBook or webinar, we created a mini-course and sold it for $29 directly from an ad.

We didn't pay for any of the awareness, engagement or lead gen campaigns - instead we just went straight for the sale.

The cost per acquisition was around $23, so instead of paying $10 to $15 dollars just to acquire a lead ... we were getting paid around $6 to acquire a customer.

Lead generation went from being a cost center, to a profit center.

Of course, as soon as they purchased the $29 course, we invited them to purchase the full program at $199 ... and 29% of people converted to this offer.

So, how much was it costing per sale for our main $199 program?

$0.

And now with an email list of people who are buyers from the beginning, we are able to increase the lifetime value by continuing to add value to their lives.

The other aspect to this is that we are using OPM (other people's money) to fund our paid advertising and customer acquisition.

Here's how that works.

Being able to write and launch ads that convert like this to a cold audience on Facebook is a very specific skill set that many social media advertisers don't have, and being able to generate immediate profit from paid advertising is a significant business advantage.

More efficient ad spend and reduced CPA can have a significant impact on lifetime value.