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Get a Wise Perspective On Your Startup's Marketing & Sales Initiatives

Learn how to think about your marketing and sales investments in a structured and effective way.

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Marketing & Sales Excel Model

Get a clear mind about your funnel, performance, and metrics
$ 27
  • Marketing Funnel Hypothesis
  • Marketing Experiments Metrics
  • Free Model Updates
  • Email support
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SaaS Subscription Startup CEO Pack

Get a clear mind about your funnel, performance, and metrics
$ 197
  • Online Course (~ 4 hours)
  • SaaS Excel Simulation Model
  • Marketing & Sales Excel Model
  • Free Model Updates
  • Email support
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1. Start With Your Funnel Hypothesis

It all starts with your marketing funnel hypothesis.

What is it? It’s your method to intentionally convert people who don’t know about your product into your customers.

Don’t just spend your marketing budget and hope for new customers to come.

Design a strong hypothesis on how to turn people in customers (considering all the required steps for it to happen).

Let me give you an example of a marketing funnel:

You’ll REACH people through search engines ➡ Some of these people will VISIT you site  ➡ Some of these visitors will CLICK on a link for your sales page ➡ Some of these prospects will BUY your offer.

And your first mission is to define and visualize the steps of the funnel, as well as start building your first hypothesis for the conversion rates.

The conversion rates are simply the percentage of people who goes to the each stage of your funnel.

E.g., if you reached 100 people and 10 of them visited your site, you have a conversion rate of 10% (Reached to visitors)

Using the model to define your funnel hypothesis

In the top section of the model, you’ll find the fields related to your marketing hypothesis.

Although you find many different columns, you’ll have to fill in information in just 8 cells (the blue ones).

So, let me tell you what those blue cells ask from you:

  1. Investment: this is the amount you intend to invest in a specific period (month, quarter, year).
  2. Cost per impression: this is how much you believe you’ll pay on average for each impression (e.g., your add being showed in Google searcher’s screen).
  3. Conversion Rate (Stage 1-2): the percentage of people you believe will go from stage 1 to stage 2 of your funnel. 
  4. Conversion Rate (Stage 2-3): the percentage of people you believe will go from stage 2 to stage 3 of your funnel.
  5. Customer Lifetime Value (LTV): it’s the amount of value a single customers / subscriber adds to your startup during their lifetime with you. P.S.: check this post for more info on LTV.
  6. Subscription Period (for subscription business only): it’s the core time-frame of your subscription fee (monthly, yearly).
  7. Price (subscription business only): it’s the price you charge for your subscription
  8. Gross Margin (subscription business only): it’s your subscription price minus the COGS (Costs of Goods Sold)
Well, that’s it.
 
After completing the information about your hypothesis, you’llstart getting some insights about it:

In the above example, I considered:

  1. Investment: $10,000
  2. Cost per impression: $0.04
  3. Conversion Rate (Stage 1-2): 1.5%
  4. Conversion Rate (Stage 2-3): 1.0%
  5. Customer Lifetime Value (LTV): $800
  6. Subscription Period (for subscription business only): MONTHLY
  7. Price (subscription business only): $100 per month
  8. Gross Margin (subscription business only): $80 per month

So, if I can make these metrics come true, I’ll have the following outcomes.

  • CAC (Customer Acquisition Cost): $263.16 (this is the amount I’m paying on average to get a new subscriber)
  • ROI (Return On Investment): 204% (how much return my marketing investment has produced)
  • Total Return ($): $20,400 (the total amount of money I got from the new customers.
  • MRR (Monthly Recurring Revenue): $3,800 (the amount of revenue I added per month from new subscriptions)
  • CAC Payback Period: 3.3 months (the time it takes for the customers value to cover the CAC)
  • LTV/CAC Ratio: 3.0 (the number of times LTV is higher than CAC

2. It's Time To Test

Okay. 

The good news is that the first part of your marketing funnel strategy is done. You’ve finished your hypothesis.

The bad news is that it’s still just a hypothesis. 

So, the next step is to test your funnel hypothesis in the real world.

Using the model to test your hypothesis

After completing your first hypothesis about your marketing funnel, we’ll move towards the second part of the model.

In this part, you’ll tell the model what happened in your tests.

As an example, let’s consider you did two tests so far: Channel 1 Ads and Channel 2 Ads Campaigns.

Now, let’s consider you got the following results from your tests.

CHANNEL 1 – Ads Campaign: 
– Investment $1,000
– Impressions: 50,000
– Visitors: 500
– Subscribers: 30

CHANNEL 2 – Ads Campaign: 
– Investment $750
– Impressions: 30,000
– Visitors: 600
– Subscribers: 15

 What does that mean? Let the model tell us…

marketing model

The results:

  1. Channel 1 Ads had the lowest cost per impression
  2. Channel 2 Ads had the best reached to visitors conversion rate
  3. Channel 1 Ads had the best visitors to subscribers conversion rate
  4. Channel 1 Ads had the lowest CAC
  5. Channel 1 Ads ROI (2300%) was better than Channel 2 Ads (1500%)
  6. Channel 1 Ads MRR ($3,000) was better than Channel 2 Ads ($1,500)
  7. Channel1  Ads had the lowest CAC Payback Period

3. And now... ?

You covered the two first steps: 1) your initial hypothesis and 2) your tests.

Now what?

Constantly Update Your Hypothesis

The tests you do will show you how good your hypothesis is.

Based on the tests we did with channels 1 and 2, we’re able to update our initial hypothesis as follows:

  1. Cost per impression: $0.02 (Instead of $0.04)
  2. Conversion Rate (Stage 1-2): 1.3750% (instead of 1.5%)
  3. Conversion Rate (Stage 2-3): 4.09% (instead of 1.0%)
The more accurate your hypothesis is, the more confident you’ll be about your marketing investments return.

Optimize your Investments

Of course, another advantage of keeping track of your campaigns is to maximize your return.

So, if a campaign is performing amazingly, put more money on it.

However, if another campaign is delivering you a poor result, shut the flow of money to it.

Now, it should be clear that without tracking, your wasting startup’s money in the wrong campaigns.

What Else Would Like to Know?

Leave me a message (questions, comments, feedback…anything is really appreciated)

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