The Cheap Leads Fallacy

Video Transcript

The Fallacy of Chasing Cheap Leads in Advertising

The Allure of Cost Efficiency

Hi, this is Terence from Radical Marketing. Today, I want to talk about a very important topic if you’re doing any ads, and that is the cheap leads fallacy. So here’s the thing. When everybody runs marketing, when they run ads, this is what they all think about, right? I want to get cheaper leads.

The True Value of Leads

Why is my leads not cheap enough? I want to get more and cheaper leads. But is that really that important? Because when you think about it, the cheaper leads does not necessarily mean you get more money for your advertising dollar.

The Primacy of Return on Ad Spend (ROAS): The ROI Perspective

So let me give you an illustration. If you were to get like, say, super cheap leads at $1 each, right? And we have done this before, getting really cheap leads at $1 each. Guess what? We got hundreds of people signing up for an event and only something like 1 % of them showed up and none of them bought anything from the event.

Evaluating Success through ROAS

So if that’s the case, is cheaper leads really that important? The answer is, as you know, no. What’s really important is your return on your ad spend. What is return on ad spend? Return on ad spend means that we want to calculate for every dollar that you put in to your ads, how many dollars do you make in sales?

Analyzing Ad Effectiveness: A Holistic View of Success

So I think it is so important for us as marketers and as business owners to actually measure the return on ad spend and pay less attention to the cost per lead. Now I’m not saying that cost per lead is not important, but return on ad spend is the ultimate measure of how effective your ads are.

 The Hidden Insights

What we’ve done recently, for example, is that we have actually measured all our ads, every single ad that we did, right? And found out what is the return on ad spend at the end of the day, after they gone through the webinar, after they gone through workshop, how many of them actually purchased the high ticket offer at the end, and from there, it’s very interesting that certain ads with certain messages attracted the right type of people with the right amount of money or who had money to invest in courses that gave us the best ROAS.

 The Complexity of Ad Impact

Okay. So you can’t actually measure by simply looking at cost per lead, which is very much in the top of the funnel. But if you look throughout the whole funnel to the end of the day, who is buying, you will actually find some very, very interesting figures as to what ads are actually generating you the sales.

Navigating the Quality-Quantity Balance

To our surprise, it is not always the cheapest ads that are generating us the sales. It is actually some of the most expensive cost per lead ads that’s actually attracting the right people for us that will actually buy something at the end of the day, right?

Crafting Effective Advertising Strategies: Focusing on Relevance

So if you’re not fully convinced yet, let me ask you another question. How much does it cost you to actually have you or your sales team constantly talking to unqualified people? I mean, you have to factor in that cost as well, right? So I think it is so important to measure your return on ad spend.

 Tailoring Messages to Your Audience

And from there, figure out what ads, what messaging is getting you the right type of customers that will end up buying from you. So how do you make sure you have high quality leads that are of a reasonable cost per lead rather than just going for the cheap CPL leads?

Attracting the Right Audience

Okay. So first of all, you need to have the mindset that, Hey, you want better quality leads, right? So for example, if I write an ad that is attracting broke, desperate people, I might get a very cheap cost per lead.

Understanding Your Ideal Client

But at the end of the day, are they going to buy your high ticket offer? No, they’re probably not because they can’t afford it. So I think first, firstly, you have to say, okay, I’m going to look at return on ad spend as the most important metric rather than looking at cost per lead.

Targeting the Right Market

Okay. So that is the number one thing that you need to start doing. And secondly, I believe it is also important to narrow down your target market because most people, they think they have like this product, this offer that everybody wants to buy.

Creating Compelling Messages

And while that may be true, there are a certain, uh, there is a certain segment within that broad market that are your ideal clients. So your ideal clients may be the ones that are willing to buy more than one product, right?

 Crafting Messages for Effectiveness

So those are the people who are your ideal target market, right? So while everybody may be, you know, somewhat your target market, you should narrow it down to find your ideal target market. And from there, you want to craft messages specifically to those people.

Tailoring Messages to Your Ideal Audience

And how do you do that? That is by fully understanding their pains, their desires, their challenges, and emotions, right? That’s how you can tailor make a specific message towards these people.

 Effective Communication Strategies

And, uh, one of the common tactics is people use like call out right in the ads, but what we do is we usually do it in a more subtle way, right? So recently, for example, for a client of ours who wanted to attract rich people to his webinar, for example, we didn’t say, Hey, all you rich people out there, this is the webinar you’ve been looking for right now.

 The Key to Success: Return on Ad Spend

So that’s the guys do not fall into the trap of the cheaper leads fallacy. Make sure you look at your return on ad spend instead. And from there, you’d be surprised as to how much more effective and how much better the returns you get from your ads can be.