Do you use paid advertising to generate leads and get customers/clients?
I get it. I understand.
Advertising is expensive. And it’s not getting cheaper. It costs 30% more to advertise to the same group of people today than it did just 12 months ago. And one year down the line, it’ll be 30% more expensive than today.
If you’re having trouble with converting paid advertisements into profit, you’re neither alone, nor doing anything wrong. That’s the way it is. And that’s how it’s going to be. It’ll continue to get more expensive.
To make matters worse, people are responding to ads with far less attention than they did even ten years ago.
Dear fellow entrepreneur,
My name is Lakshay Behl.
Ten years ago, some big hot-shot advertising legend said it takes seven contacts with a prospect before that person can know your brand, understand your stance, form an opinion, and decide one way or another.
That was ten years ago. Today, most of your prospects will not even notice your ads if all you deliver are seven impressions to them. It just won’t register.
The noise from your competitors… is blaring. Blinding.
They don’t see your ads, or anybody’s ads, really.
And can you blame them?
- How many times a day do you skip ads on the internet?
- How many times do you go out of your way to avoid looking at, hearing, or paying attention to any advertising in any way, shape or form?
Just like you’re skipping ads, your audience is too. They’re skipping your ads with as much impunity and callousness as you’re skipping other people’s ads.
That’s the way it goes.
And that’s just the first part.
The second part is – even if you somehow manage to capture their attention...
Conversion rates have pretty much plummeted.
Twelve years ago when I started my first online business, I offered my audience the ability to download a free PDF ebook… and one in five visitors to my website signed up.
Today, with significantly better ads… exponentially more expensive media… and extremely lucrative offers… fewer than 1 in 50 people sign up. And I am not offering ebooks anymore either. The offers are significantly better and far more lucrative today.
Pretty scary, right?
It gets worse.
People aren’t opening emails anymore.
Email marketing is almost dead.
I mean… again… look at your own behavior. How many marketing emails do you enjoy opening? Not many, I’d bet!
So it costs about 14x more today to advertise than it did 10 years ago. And the conversions have dropped from (at least for me) 20% to 2.5%. Effectively, the cost of getting a lead today is 112 times higher.
One hundred and twelve times!
That’s not a joke. That’s the kind of stuff that kills businesses. Very rarely can a business model survive that kind of changes.
And if you’re thinking your business is immune… think again.
In fact, let me ask you this…
Has it not been more difficult lately to get new clients?
Has it not been far more expensive lately to generate leads?
Has your industry not been headed towards consolidation… where 2-3 market leaders get 90% of all the business, while everyone else is left scrambling for leftovers?
If it has… then welcome to the boat pretty much every fellow entrepreneur in America (and the world) is floating (drowning?) in.
Now… with all that said, like with every enormous cloud… there is an enormous silver lining here too.
You see… when markets consolidate as hard as they are doing right now, inequality rises. A handful of businesses in every industry grow exponentially, while the vast majority of businesses cease to exist. And a small number of tiny players continue to exist meaninglessly.
The thing about rising inequality is that there are two sides to it. The winning side, and the losing side. The losing side that heads towards extinction.
And the winning side that profits at the expense of the losing side.
And while it’s almost always unfair… the good thing about inequality… is that it can be unfair in your favor too.
I mean, Mother Nature’s got nothing against you in particular.
And plenty of small businesses make it work in their favor, don’t they? I guarantee you that in the next 12 months there will be several newly incorporated businesses that will capture the fancy of audiences worldwide and become billion dollar affairs.
The question you need to ask… assuming you’d like to be mega-successful yourself… this...
What the difference is between those handful that go on to break wild records and the rest?
And the answer lies in disproportionation.
In inequality, if you will.
Let me explain.
So you know the 80/20 rule, right?
The one that implies that 80% of all results come from 20% of all effort, and so on.
Well, you can take it further...
- 80% squared, or 64% of all results come from 20% squared, or 4% of all efforts.
- 80% cubed, or 51.2% of all results come from 20% cubed, or 0.8% of all efforts.
In other words, you can fire 99% of your clients tomorrow morning.
And so long as you keep the best 1% of your clients… the top 1% of your clients… the top 1% that bring in the maximum amount of profit… you’ll still make more than half of your revenue.
Let me rephrase…
More than half of your revenue comes from (or can come from) just the top 1% of your clients.
That’s how it works. That’s the nature of the game. Invariably. (Of course, this is assuming that you have a series of products and offers at varying price points that can saturate engagment and expenditure potential - more on that coming later.)
Now, if that’s how it is…
Does it not make sense to disproportionately allocate resources to seduce, talk to, stay in touch with, support, and otherwise treat well the best 1% of your clients?
Does it not make sense to spend 10x, 20x or even 30x more to get such clients than you spend on an average to get your clients? I mean, strategically speaking, these people (if you can identify them and make them right offers) bring in 64x more revenue than the average.
I have three clients right now.
They pay me low to mid six figures each year each. That’s a decent amount of revenue for the amount of time I spend working. Which, to be perfectly honest, can be 12 hours some days. But on an average, I work less than 3 hours a day.
Now… had I worked harder like everyone else, and for some reason hadn’t pursued the strategy of attracting only the top 1% to work with, I’d end up with 100 clients who’d on an average pay me $5854. Assuming I’d spent roughly the same amount of money on advertising.
Or worse, 300 clients who’d pay me $2272 each.
That’s just statistics. Pure math.
(And by the way, I’ll talk to you about how I arrived at those exact figures in the upcoming days. Keep reading to find out how you can see for yourself.)
Anyway, back to the math. So 100 clients paying me $5854. That’s $585,400 a year in revenue. Which is actually less than my current revenue with just the three clients.
But here’s the kicker...
My profit margin right now is almost 3x higher than it would be with 100 clients. And over 4x higher than it would be with 300 clients.
In other words, I’d be making less than a third of what I’m making right now… when all is said and paid.
Like I said… disproportionate allocation of resources.
Now… this post has been long enough already. So here’s what we’re going to do.
In the next post (Should I call it Clientology 102 or 101.b if I called this Clientology 101?) we'll talk about the Math. About how I arrived at those numbers, and derived my conclusions.
By the way, I am a big believer in this idea:
"The world works the way it works, not the way anyone wants it to."
Which is to say every idea must be scrutizined and tested for compatibility with the real world. And that is exactly what we'll look at in my next post.