I am always amazed when I see or hear about a company that spends their CPC dollars on an ad and pushed that traffic to their homepage. I was listening to a great podcast this morning where Seth Godin explained it in naked dollars and sense that makes it crystal clear.
You pay $8 for someone to click on an ad and they land on your homepage. Your homepage is not where conversions happen, so now you have to hope that your homepage is so clear that the visitor clicks towards what it is you want from them, let’s pretend it’s a form that puts them in the sales cycle. In the best of circumstances about 10% of the people will click on the button that says “Learn More”.
What just happened is your $8 investment just became a $80 investment to get those 10%. But wait, there’s more!
Now on that page, you request their email address. Only 20% agree to do that step. Now you’re in $400 to get one of those people as a customer.
My sales team emails those people, 1 in 10 actually turn into customers – each customer costs me $4,000 to acquire.
What if someone else see’s what I’m doing and decides they want some of that, and pushed the auction price for that word up to $16. Now each new customer will cost me $8,000.
That new competitor figures out how to entice those people to convert by sending them to the conversion page instead of the homepage. They are now 5x more efficient than you! Their cost of a sale just went down 80% compared to you.
How long can you compete for customers with that kind of disadvantage?