You Ask, I Answer: SaaS Lead Flow?

In today's episode, VJ asks for a SaaS product. I've experienced lead flow is high on Facebook, but the conversion is very low as compared to Google Ads. What do you say about inbound, outbound ads? What would be the metrics that matter for results? There's not really a difference in terms of metrics that matter for results, right?

If you have a SaaS product, you have some kind of sign-up. Maybe it's a free trial, maybe it's a paid conversion, but you have some way of determining, yeah, somebody did the thing we want them to. Someone has signed on the line and bought the thing. If that's the case, then it doesn't really matter Facebook or Google Ads or Instagram or LinkedIn or whatever. What you're looking at in terms of the key metrics is did you get a conversion, right?

Did somebody convert? And then was the quality of the conversion good? So your lead score, uh, which again, many SaaS companies have marketing automation software and CRM software that will enable that kind of lead scoring. And then what was your cost per acquisition, right? What did it cost to get that lead?

So it's a it's a balancing act. If let's say your leads are scored like academic rates, A, B, C, D, and F, right? And F is a failing lead. This lead has no ability to buy anything. They're they're worthless, right?

And an A is like, yeah, this is our perfect customer. They're they're big spender, they're gonna be a longtime client, etc. The question is, what is your balancing line, right? Clearly, nobody wants F's. No one wants a bucket of Fs, right?

And in abstract, everyone would love a bucket of A's. But if a C costs $10 and an A costs $1,000, the question is, is the return that you're going to get worth that A or not? If your product makes a hundred bucks, then the C is worth it, right? Because you're getting, you know, C quality, so maybe every third lead is going to be good, but you're paying, you know, effectively 30 bucks for a quality lead, if one and three is good. But your product is a is a hundred bucks, you're going to make a net of 70 bucks afterwards, right?

On the other hand, if you paid a thousand bucks for that A and you only get a hundred bucks in revenue, you've lost 900. And so at that point, your lead quality and your lead cost are the things you have to balance and say, at what point is it no longer worthwhile using a particular lead source? Now, in this scenario that you're describing, if your lead flow is high and your conversions are low for Facebook, then it sounds like Facebook's lead quality is not great. The question you have to ask is, what are you paying? If you're paying a dollar a conversion on Facebook and you're paying $2 a conversion effectively in Google Ads, then yeah, even the quality is terrible, you're still better off with Facebook in that instance.

If on the other hand it's the reverse, then stick to Google Ads. One of the challenges that people run into with analytics is that they take each number sort of in its own right out of a context, and the business decisions that we have to make are typically a lot more complicated than a single number. If it's just cranking out raw number of leads, that's that's not great. If it is just cranking out super high quality leads, you know, regardless of cost, that's also potentially not great. We need to have that big picture context of here is here's the trade-offs we are willing to make.

I think that's the best way to put it. Here are the trade-offs we are willing to make. We are willing to accept C leads at $10 instead of A leads at a thousand dollars, because the profit margins dictate that. If we want to be profitable, we want to make money on a sale, we have to do X. One of the things that I've seen companies choose to do, and it's questionable whether it's a good idea or not, depending on the business, is do loss leader stuff.

Like say we're gonna spend a whole bucket of money on acquisition and growth and hope that people stick with us and hope that people you know pay off in the long term, that the lifetime value of a lead is higher than the acquisition cost, and then you know, maybe the first year's value, if you're banking on a five-year uh value from that lead. If you don't have that data or the data doesn't support it, it can be very risky as a strategy. So that's what I would say about these different kinds of ads and comparing them and looking at the metrics. You have to look at the basket of metrics, you have to look at the the net profitability from any given channel and say, what is the cost of this business? What is the revenue of this business?

And is it ultimately positive? Because no matter how you slice it, if you're spending more than you're making, eventually you're going out of business. It might not be tomorrow, but eventually that catches up with you. If on the other hand you're making money, right? If you are if your cost is less than your value that you extract, you can do that as as much as you want, and eventually your business will hit the goals you've set out.

So that's the answer I would suggest to that question in terms of lead flow and metrics. I look at cost for acquisition, value, net profit, um, conversion rates, and all those things together. Build a weighted score. Use that to build your scoring mechanism, and then you can assign a lead score based on those different factors for your marketing automation software to score leads and come up with good answers for your dashboards. So that's how I would tackle that.

Your mileage may vary, but I find that's the best way to balance all those competing factors together. Thanks for asking. If you like this video, go ahead and hit that subscribe button.