Make them pull out their credit card!

Written by Mark Pecota

Today’s the day. In a few minutes, you’ll be launching your product online and will learn if all the preparation you’ve done over the past 6 months will be worth it. You’ve built shiny marketing assets, have a way for customers to checkout, and have a pre-launch email list you’ve spent thousands of dollars building through Facebook ads.

Your launch email goes out to your email list.

5 minutes pass… 5 sales

15 minutes pass… 2 sales.

60 minutes pass… 0 sales.

Uh oh.

This is a situation that happens to more products than most realize. They spend months and thousands of dollars building up an email list to launch their product. But when they go to launch, very few of the email subscribers convert to customers.

How could this have been avoided?

If only you knew how qualified your pre-launch email list was before you went to launch your product, you’d have a better idea of the number of sales you’d generate.

So, when generating leads, which metric should you be looking at to measure the qualification of a lead?

  • Click through rate on the ad?
  • Email open rates?
  • Cost per lead?

I’ve heard people who look at engagement metrics on their email list and say “my list is qualified because I’m getting 50% open rates!” That’s good, but it’s not the right metric.

They’ll survey their email list and ask them questions about purchase intent and say “my list is qualified!” That’s not the right metric either.

Lastly, most people will look at the cost per lead (CPL) as the main indicator of whether or not their lead generation efforts are successful, but that’s still not the right metric.

At the end of the day, all that matters is if they do one thing:

Pull out their credit card, and send you some money.

You generated the lead in the first place to make money, which is why we need to be looking at revenue.

But when building a pre-launch email list for a product, you don’t have the luxury of tracking revenue because you are building the list months before the product even launches. Right?

We’ve been testing a novel way to track revenue before we launch. We call it the Reservation Funnel.

The Simple Reservation Funnel

Step 1 — Click an ad from Facebook

Step 2 — Opt in on a squeeze page

Step 3 — get dropped off on a “reservation” page where the subscriber can put down a deposit to lock in a huge discount on the product.

Why This Is A Better Way To Build a Pre-Launch Email List

With this funnel, you are able to gather revenue data about the audiences you are targeting on Facebook. Even if people are only putting down a deposit, the act of pulling out a credit card is a much better indicator of “quality” than just putting in an email. You can then use this data to invest more heavily in audiences that are leading to more reservations vs. audiences that are just getting cheap leads.

Let me give you an example of how risky it is to only look at CPL when optimizing your ads.

Let’s say you are targeting 3 different audiences on Facebook for your pre-campaign:

  • Audience 1: $1.00 CPL = $1000 spent for 1000 leads
  • Audience 2: $1.50 CPL = $750 spent for 500 leads
  • Audience 3: $2.00 CPL = $500 spent for 250 leads

You decided to spend more money on Audience 1 since it was getting a much lower CPL. Let’s see what happens when you go to launch your campaign:

Audience 1 converted 0.5% of 1000 emails into sales. You got 5 sales at a $150 average order value for a total of $750 in revenue. Your return on ad spend is $750 revenue / $1000 ad spend = 75%

Audience 2 converted 2% of 500 emails into sales. You got 10 sales at a $150 average order value for a total of $1,500 in revenue. Your return on ad spend is $1,500 revenue / $1,000 ad spend = 150%

Audience 3 converted 6% of 250 emails into sales. You got 15 sales at a $150 average order value for a total of $2,250 in revenue. Your return on ad spend is $2,250 revenue / $1,000 ad spend = 225%

Falsely thinking that Audience 1 was the most qualified by looking at only the CPL caused you to spend more money there. If we would have instead ran a reservation funnel to see which people were willing to pull out their credit cards from each audience, we would have quickly realized that Audience 1 was much less qualified even though the CPL was lower.

How long do you run the Reservation Funnel for?

We are still testing best practices for the reservation funnel, but we currently allocate about 15% of the advertising budget into the Reservation Funnel. That seems to be enough data for us to understand which audiences are truly the most qualified. From there, we allocate budgets accordingly and scale for the rest of the ad campaign.

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