Picture this: Business was going great, and then some unexpected changes happened. There was COVID-19. You realised that more of your customers in Indonesia are going digital, and so are your competitors.
As a marketer you were used to being measured on clicks, impressions, website traffic. But now, your management wants you to deliver business results – like actual sales! – and prove that their investment in marketing is delivering value. How do you transition?
Or perhaps you’re in sales. You can’t go out to meet prospects. Maybe you’re expecting leads from your marketing team, but the leads they’re sending in are mostly junk. Sounds familiar?
Because of the scenario above, more businesses are focused on making sure they’re bringing in actual leads, which will hopefully convert to customers. You may pay your advertising agency a pre-agreed amount for each lead that comes through – for example, filling up a form or downloading an app or submitting a credit card application.
Your agency or your marketing team may be bringing thousands of leads a month, which is a great start. But put yourself into the shoes of your Chief Sales Officer. Imagine getting 1000 leads, paying a previously agreed upon amount for each lead, and making no sales out of them. We’re back to square one. Junk leads are little better than vanity metrics.
For certain industries, the sales process is complex or the product is pricey. Real estate, education, credit cards, e-wallet registrations or even high-end automobiles, require a screening process to ensure leads meet certain eligibility requirements (e.g. income levels, credit history, identity verification).
Since revenue from a home purchase is a substantial amount, the marketer would agree to a large cost per lead. However, this cost per lead can backfire, if the acquisition or lead is defined as “each successful viewing”.
You’ve also wasted your sales team’s time chasing after prospects who aren’t serious about buying a home. Not a very efficient campaign, whichever way you measure it.
Now imagine if you choose to pay for the actual sale instead. We call this a Cost-Per-Outcome.
Marketing looks good. Sales are happy as they’re left with time to search for more serious buyers. The business is in better shape.
The process for setting a CPO for campaigns can vary based on the desired outcome, and the nature of the business.
Here are a few things to consider before setting cost-per-outcome targets for your agency:
Based on your industry, category, experience, and past campaign performance; set appropriate benchmarks for CPO for your agency.
Choose to pay only for your desired outcome, which could be a successful credit card application, app sign-up, or even the number of final approvals/sales – it’s really up to you to decide.
Forecasting potential monthly growth in your category/product niche will give you an indication of whether this works.
Transparency on platform restrictions, attribution alignments, feedback loops for qualified closures, and assessment of remarketing capabilities.
With the CPO pricing model, advertising becomes an investment, instead of a sinkhole for cash. Clients only end up paying for desired outcomes, without risking heavy spend. As we head into the new normal, we need new approaches to marketing and sales — one that ensures marketing is contributing to the bottomline of the business, and helps sales get their job done better.