How to Buy Internet Leads and Calls More Strategically, Reduce CPA and Increase Profits (part 1)

By Craig SturgillMarch 1, 2017

In the first part of this 2-part series,I'm going to share four main ways to optimize your online customer acquisition efforts so you can buy more strategically and reduce your cost per client acquisition, thus increasing profits. 

Once there was a time when online customer acquisition was easy. You could buy internet leads and inbound phone calls for one flat price, in all 50 states, 24/7, and the numbers would just work. As the shift continues to grow from offline media (direct mail, TV, radio, etc.) to online (internet leads, inbound calls, etc.) the space is getting increasingly competitive. Those who are at the forefront of utilizing technology and who deploy the most sophisticated buying guidelines are the ones who will benefit most greatly with the lowest cost per acquisition (CPA) and best return on investment.

Just what is an internet lead? An internet lead is commonly defined as a consumer who completes a lead form on some website interested in purchasing a product or service. An inbound call is basically the same thing, except the consumer called a phone number instead of completing the lead form. An inbound call is typically more desirable than an internet lead because the consumer is already on the phone, which is often half of the work. However, inbound calls are generally more expensive to purchase because they cost more to generate, and there is less supply (supply and demand).

1. Stop Using Conversion Rates to Define Lead Quality
While measuring conversion rates from lead to completed sale is helpful, it is generic and doesn’t take many important details into consideration. It is critical that you establish your desired CPA and customer life time value (LTV) goal. Setting your CPA and LTV goals will not only help set your desired profitability targets, it will also help you measure your lead campaigns and lead vendors more effectively.

Many companies get hung up on the fact that they need X % conversion rate for a source to be considered good quality. A more effective approach would be to set a specific and well-defined CPA goal. For example, you may decide your desired CPA is $400 cost per sale. This means you could buy 20 internet leads at $20 per lead and if you made one sale, you would have a $400 CPA. Or, you could buy 80 leads for $5 per lead, and if you still made one sale, your CPA is the same $400. 1 sale out of 20 leads is 5% conversion rate, and 1 sale out of 80 leads is 1.25% conversion rate, but the CPA backs out to be the same. Don’t get fooled that a lower conversion rate means a lower ROI. Of course, you will need to keep in mind efficiency when buying leads, as it generally doesn’t make sense to spend 20X the amount of time to make the same sale, but the point is to look at your data with more sophistication.

2. Buy More Granularly
We discussed setting your CPA and LTV goals. Not only should you set your CPA goal, but in the insurance industry, compensation and commissions generally vary by state, and sometimes by county or even zip code. Commissions may also vary by other factors such as gender or tobacco use. To be the most granular, you should set a different CPA goal, at least by state, if not even more granular, to achieve the best results and highest ROI possible.

You should pay close attention to the performance by state or other filters you have set, looking at performance updates at least monthly, if not more frequently. If you are looking at overall performance and lumping together all states into one bucket, you will have no idea if one state is dramatically under-performing, or another state is dramatically over-performing, in terms of your CPA goal.

Let’s say you are paying $20 per lead flat, buying in all 50 states. One month you are meeting your CPA goal, and then next month you are falling short by 30%. This might lead you to the decision to reduce your cost per lead (CPL) payout. However simply reducing your CPL across the board might not lead you to the results you are looking for. What if Florida is over-performing based on your CPA goal, but California is under-performing? By reducing your blanket CPL overall, you may actually be buying less leads in Florida that works well for you, which will only further hurt your overall results. You really need to look at data on a state level, if not even greater levels of detail, to really understand the whole picture and maximize your results.

Month 1 – New Lead Campaign @ $20 CPL With $400 CPA Goal

Month 2 – Without Paying Attention to State-Based Performance

In the second part of this 2-part series, I'll discuss ways to “Pay Attention to Win Rates” and “Optimize Frequently." Look for that article next week!

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