Why should a business owner share information about revenue and profit with a digital agency?
I often come across the fact that customers categorically do not want to provide agencies with any information about sales, revenue, profit, limiting themselves to the “maximum/optimal cost per lead” calculated on a napkin, and sometimes simply taken from their heads, which in fact hinders promotion more. how does it help?
My name is Egor Uvatenko, I have been doing internet marketing for almost 20 years and since 2007 I have been running my own digital agency, which specializes in systemic marketing.
What's the problem?
Firstly, on the business side, the cost of a lead is most often determined not on the basis of analytics, research and serious calculations, but on a whim or as a result of “analysis on a napkin”. As a result, all marketing is focused on an indicator that, in fact, is taken from the head and has no basis.
Secondly, CPL in such a system is in no way related to revenue, profit and payback and is essentially a reference synthetic indicator. Without reference to margins, revenue, profit, LTV, and company expenses for a transaction, it is virtually useless.
To make it clearer, let’s look at the example of a simple service from a medical center – an initial appointment with a therapist, which costs about 2,000 rubles.
Will advertising pay off if the CPL for this service is 5,000 rubles?
The inner voice literally screams: “Of course not! Never! How can you make money if advertising costs 2.5 times more than the service itself costs?”
But let's look a little further.
After the initial appointment (2000 rubles), a person goes for an ultrasound (1000 rubles) and takes a pack of tests (5000 rubles) in the same clinic. Then he comes for a follow-up appointment (another 2,000 rubles), goes to physiotherapy, consults with other specialists, and so on.
As a result, one patient, for whom we paid 5,000 rubles, will bring the medical center 10,000 in the first week and hundreds of thousands of rubles in revenue over the entire period.
So is it profitable or not for us to pay 2.5 times more for it at the start than the initial appointment with a therapist costs?
The example shows the situation for only one service. But there can be hundreds, thousands and tens of thousands of services and goods.
Each of them will have a different cost and different transaction costs. Somewhere part of the proceeds will be eaten up by the bank's commission when paying in installments, somewhere there will be losses due to unprofitable delivery – as a result, the same product can both bring a good profit and take the balance to 0 or even negative.
How can a regular CPL help us understand here when a company makes money and advertising pays off, and when it doesn’t?
Even for the same product, depending on the conditions, this indicator will differ. And we’re not even talking about LTV yet.
To summarize:
Calculations “on a napkin” do not provide any useful information.
Relying on CPL as a key indicator in assessing marketing effectiveness makes no sense.
Beautiful numbers in marketers' reports can mean lost profits and even losses for a business.
And vice versa: advertising that is not even close to paying off in the moment can bring clients who will generate revenue for years.
The lack of information on the part of the business ultimately leads to the fact that the position of the marketer: beautiful graphs with lead volumes and CPL numbers – runs counter to the position of the business, for which payback and profit are important.
As a result, we come to a classic situation: work is underway, there are a lot of applications and they seem to be good, but there is no money in the cash register.
What to do with all this?
The answer to this question falls into the category of “easy to say, but difficult to do” and consists of several parts.
Set up a system for working with clients (including up-sales chains, linking to payments, calculating revenue and LTV) in order to see all the chains and funnels, starting from the moment you contact the company and have data on the money you receive from each client.
Engage in financial modeling in order to understand the marginality of individual products or services, see which customer segments are not profitable to work with and which should be a priority, and be able to adequately assess what share of revenue marketing expenses should make up for promotion to pay off.
Build end-to-end analytics to tie information on the effectiveness of marketing channels and tools to money and see the whole picture: how much profit the company brings (or will bring in the future) from clients coming from different sources.
Develop a strategy for systematic promotion on the Internet and consistently implement it, so as not to rush from side to side in search of a magic pill, but to calmly and predictably develop marketing, test hypotheses as planned, scale successful channels and cut off unsuccessful channels – all based on numbers and data.
Marketing and sales with this approach are combined into one common system. At the same time, we can see and evaluate the effectiveness of literally every decision or campaign in terms of money: how any of our actions helps the business earn money.
In fact, in such a system, CPL ceases to be a key indicator on the basis of which decisions are made, since we can immediately see the results in revenue.
No matter how much leads from a certain channel cost, if they bring profit to the business, it can and should be scaled.
The opposite situation is also true: even if there are a lot of leads, and they cost pennies, but do not bring money in any way – such channels can be safely cut off and the budget redirected to something more profitable.
As a result, we get a system of absolute control, which is important not only for marketers, but also for business as a whole, since all the key points and bottlenecks become visible in full view – and it becomes possible to correct them, optimize internal processes and earn even more and through better quality service and customer service.
Now let's talk a little more about its individual elements.
Customer service system
It makes it possible to digitize the entire customer journey from the moment of application: first purchase, repeat purchases, the amount of revenue that he has already brought to the company, forecast for future purchases and revenue.
All this can be solved using:
Debugging and describing internal processes in the company.
Setting up a CRM or ERP system to bring everything together in one place.
At the same time, we can also link here not only sales and revenue, but also other indicators: payroll, administrative expenses, transaction costs, etc. – anything, depending on the characteristics and specifics of the business.
We can later use all this data when drawing up financial models and transfer them to our end-to-end analytics system to link customer information with marketing channels and tools.
Financial model
Allows you to calculate the marginality of specific products or services under different conditions and determine the optimal and maximum amounts of promotion costs at which a business can not only advertise, but also earn money, scale and develop.
Financial modeling can be either a completely separate process or integrated into a CRM or ERP system. In the second case, working with data will be easier and more convenient, but integration and adaptation to the unique features of your business can be very expensive.
In any case, even Excel provides enough opportunities to develop a financial model that will reflect business performance with a high degree of reliability.
End-to-end analytics
Allows you to combine all data sources on one dashboard and connect marketing activities and lead generation with customers, sales, upsells, profit, LTV and any other financial indicators of the business.
IN one of my past publications I have already talked about how custom end-to-end analytics helped us connect marketing channels with revenue for the emigration center and how this approach helps both us and the company increase the efficiency of marketing and sales.
This example clearly shows the importance of end-to-end analytics for marketing in an area where each sale brings in hundreds of thousands and even millions of rubles and can stretch over many months, during which sometimes there are dozens of contacts with potential clients at different levels.
As a result, we, as marketers, and the company's management receive all the necessary information in one place to plan promotion, spend the budget effectively and make management decisions aimed at developing and scaling the entire business.
Another example, which I will also write about in more detail someday, is a refrigeration equipment plant, with which we started working relatively recently.
Each sale in this area brings in tens of millions of rubles, but it can take several months from the moment of first contact to contacting the company, and a sale can happen even after a year.
In this case, end-to-end analytics gives us the opportunity to connect digital and CRM marketing and clearly see which chains and solutions are ultimately converted into revenue and profit.
A similar situation will occur when promoting IT services.
System marketing
When we have a reliable foundation of CRM, a financial model and end-to-end analytics, it becomes possible to build systematic marketing.
Based on a well-developed digital strategy, it allows you to launch campaigns in such a way as to reach the most profitable audience segments, quickly scale advertising channels and reallocate budgets, create catchy creatives adapted to the needs of the audience – and all this based on numbers and payback, which is considered in real time.
At the same time, the cost of a lead for individual channels may differ tens of times, but each of them will pay off and bring profit to the business.
Against this background, I repeat once again, CPL and other synthetic indicators lose all meaning, since the effectiveness of everything that we, as an agency, do can be tied to the most important indicator for business – money.
Please note that in this system all four elements complement and reinforce each other.
Which leads to another important conclusion: you can’t do one thing and forget about the rest.
Even if the budget is small, you need to invest in every element in order to build and launch a system that will develop your business.
In conclusion
It seems to me that everything I wrote above makes the answer to the original question about why transfer business data to an agency obvious.
If you don’t do this, then you simply won’t be able to build an effective marketing system.
Yes, some of its individual elements can be implemented. But it will no longer be possible to make everything work like clockwork due to the agency’s lack of data and reliable information about the impact of its work on financial performance, revenue and profit.
