The Game with Alex Hormozi - How to get Cheaper Leads | Ep 245

Episode Date: October 30, 2020

The moment you don’t understand, you’re at a bottleneck. Today, Alex (@AlexHormozi) talks about the important factors you should know when figuring out what your cost per lead is, how these factors work together, and help you understand the kind of paid ads you should be running.Welcome to The Game w/Alex Hormozi, hosted by entrepreneur, founder, investor, author, public speaker, and content creator Alex Hormozi. On this podcast you’ll hear how to get more customers, make more profit per customer, how to keep them longer, and the many failures and lessons Alex has learned on his path from $100M to $1B in net worth.Timestamps: (1:51) - 3 pieces for cost per lead: CPM, CTR, CPC(5:22) - Alex explains how these 3 pieces determine cost per lead(6:50) - When running paid ads, understand platform dynamics and competitionFollow Alex Hormozi’s Socials:LinkedIn | Instagram | Facebook | YouTube | Twitter | Acquisition

And so hopefully if you're running paid ads right now and you're trying to get leads and you're like, how does this work? These are the pieces. Welcome to the game where we talk about how to get more customers, how to make more per customer and how to keep them longer and the many failures and lessons we have learned along the way. I hope you enjoy and subscribe. What's going on, everyone? Happy Wednesday. Hope you guys are as excited as I am for the new setup that we have here. I can't even tell you how stoked I am.

This has been a long time coming. Thank you guys for the support and just the messages that I've been getting. has been great. What I want to talk about today is so many of the ideas that I can finally put on paper and make visual for everyone, which is how to fix lead cost, right? And I think one of the things that I struggled with this when I started out was, you know, I had like one play, one way that I knew how to do. And it was just like, okay, don't change anything because I don't know how any of this works.

I just know that like when I run this to this, it does okay. But the thing is as soon as it would break, then I was like, crap, what am I supposed to do now? right and so in thinking through this it's um it really came down to understanding the aggregate parts and so it's kind of like when when i started uh you know in fitness you had your own kind of way of doing things as that's what worked for you right you're always trying all these new diets and stuff and then finally when it works and you're like this is the way you know it's keto or it's intermittent fasting or it's veganism or whatever right and so then when you get a first client you're like okay do this and don't change anything and the thing is obviously some people need different things but on top of

that when you don't understand all the integral pieces of programming, et cetera, then when someone gets stuck, you don't know how to fix anything because you just know how this whole thing works together and that's all I know, right? And so once I figured this out within the marketing, all my anxiety around marketing and paid advertising, et cetera, just kind of went by the wayside because I just understood all of the integral pieces so that I could fix it. All right. And so there's three pieces to figuring out what your cost per lead is, all right? And I'm going to break down each of these things and this is gonna be a big kind of bigger picture overview and I literally just went through this so I thought it would be valuable for you so we just ran

two campaigns we ran a we ran two five-day challenges back to back and we had different uh different campaign uh cost and cost per group opt-and so I wanted to figure out what the issue was all right and so the way that paid ads work from a from A to Z soup to nuts right is understanding that fundamentally what we're doing is we're buying eyeballs all right so in the beginning you're gonna buy this nice eyeball from Facebook or YouTube or Google right they're gonna there's a little little people for you right you're gonna buy these eyeballs and these eyeballs for most markets will cost around 25 there's obviously some niches that'll be more expensive but for most the cost

by balls 25 now how many eyeballs does that cost and the term for this is CPM all right and just so you don't get confused about this CP for most CP stuff is cost per right so you only got to remember what the last letter means so M is just the Roman numeral for a thousand So cost per 1,000. So cost for 1,000 eyeballs is $25. Simple, right? Which means it's 2.5 cents an eyeball.

Great stuff, right? And so you buy 1,000 eyeballs. So I'm gonna put 1,000 under here just to make this really simple here. And then from there, you're gonna have a certain percentage that take an action, right? That click, all right? And so we call that the CTR, right?

Click through rate, that's what that stands for, CTR. Now we really look for unique click through because that's what we care about. It's not one guy clicking a hundred times, but I want to know how many unique people click the ad. Now, from a benchmark standpoint, normally you're going to have between, you know, 0.5% and 1%. It's kind of like average.

If you get above 1%, you're doing well. If you get above 2%, you're just killing everyone, right? So let's just say we have 1%. All right, that's what our click through rate is. So we've got 1,000 eyeballs, 1% click. And what that means is we're going to get 10 clicks, right? 1,000 times 1% is 10 clicks. All right.

So hopefully this is starting to make sense. Moza Nation, real quick, if you are a business owner that has a big old business and wants to get to a much bigger business, going to $50 million plus, we would love to talk to you. And if you like that, we would like to hear more about it, go to acquisition.com. You can apply anywhere on the page and talk to one of our team and see if we can help you get there. Now, what's my CPC? Remember CP? What's the C? Click, my cost per click. So my cost per click is to me this 10 clicks from $25. So if I have $25, right, and I get 10 clicks, then it means that my cost per click is $2.50.

Right? It's just $25 divided by $10. Cost per, right? Now, it's still not my cost per lead. So what's the next thing that's going to happen? My 10 clicks, all right, are going to go to a landing page. And then I'm going to have a conversion percentage on this page, right? Not 100% of clicks obviously become leads.

And so what's my conversion percentage? I'm going to use 20% because for a lot of people, that's going to be a good starting point for many of you in terms of what a decent conversion percentage can be. In some niches, you can make it better, and it depends on your offer, et cetera, but let's just use 20%. And so what that means is that of my 10,

20% are opting in, which means I get two leads. So the next question is, what's my cost per lead? So we did cost per click here. My cost per lead is gonna be $25, just like before. divided by two leads, which means my cost per lead is $12.50. Right? And so the reason that it's so important, and I remember when I figured, like when I understood this part,

because this part I kind of understood, but not where the actual cost per came from, right? Is that if I'm looking at a campaign like my own, the last campaign I ran side by side, Campaign A, I had more expensive eyeballs, but I had more clicks and I had a higher conversion. And so that might mean that what I had was a little bit spamier or more like direct response e.

And because of that, the platform doesn't like those things as much. They charge me more for the eyeballs because it wasn't as engaging. But the audience thought it was really interesting, so they clicked more, and they thought the offer was better, so they opted in more, right? We tried another one to decrease our CPM and be a little bit more friendly to the platform. and we did drop our CPMs, but our click-through rate and our conversion on the page actually went down. And overall, we ended up actually doubling our cost. And so looking at each of these pieces is how you can diagnose your campaigns

and ultimately be able to fix it. And so for me, this was like a huge breakthrough in understanding that took, I mean, honestly, it probably took me two or three years to actually understand this. And so hopefully if you're running paid ads right now and you're trying to get leads and you're like, how does this work? these are the pieces, right? This is going to be how much the platform likes you and how many other people are marketing

into that same audience. That's where the cost is going to come from. For your click-through rate, it's going to be how compelling your messaging is and how good the creative might be. And then the same thing here on your conversion is how good is the offer, how good is the headline, how compelling, you know, how well designed is the page, how fast does it load, et cetera, so we can increase this conversion percentage. A lot of times people want to lower their lead

cost and they just look here, because they feel like it's the only thing they can understand. When a lot of times, you're sometimes losing or winning the war based on the click-through rate or what you're actually, how your ads are being displayed. And so one of the first things I do when I'm looking at a campaign, if it's not acting right, is I'm looking at my CPMs. I'm like, well, how much is it costing for us to get this displayed?

And if it's like $80 plus CPMs, I'm like, okay, I don't think that's reasonable. I think something is missed in the creative, we really need to fix this. And so then I don't look at my funnel. I'm not worried about my click-through rates. because I know that this is the big issue, right? If my click-through rate is like 0.2,

then I'm like, all right, our messaging's way off. I don't need to worry about this other stuff because this is where I need to focus. If I've got a page that's converting at 5%, then I'm going to try and fix this because these two don't even matter if I'm at that percentage. So hopefully this makes sense

when you're walking through trying to fix campaigns and whatnot, and understanding each of the integral parts allows us, at least for me, to be able to not have anxiety around this stuff because then it just feels like, all right, they're just variables, they play together, and I just need to fix the thing that's broken. And then as soon as it's fixed, it works, which is the point.

So hopefully that was valid before you. Hopefully, this is cool. Hopefully you like the new setup. I'm, like, beyond stoked about it. I can finally, I can make these on my own now. I'm so, like, so excited. And so anyways, if you like the setup, shoot a comment, shoot a review, tag somebody.

And if you like more stuff like this, hopefully you do because it's going to be done. Then I can't wait to give you more stuff. So keeping awesome, lots of love, and I'll catch you guys soon.