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QuoteHi,
I have been doing a bit of experimenting with Facebook Ads, which John, Steve and another Inner Circle member kindly helped me with. It got me realising that your whole sales funnel needs to be operating very smoothly to get to the sales. This takes a lot of care and consideration for what the audience wants out of it.
This meant that I took a step back and thought about the end goal to help me visualise what I was trying to achieve. Now I’m a bit confused because I’m not sure what I should be aiming for!
I did some number crunching and now I’m struggling to understand how to make a profit out of this.
Here’s my thinking, based on roundish numbers (not ones I was specifically intending on using, as I was trying to work out what I need to be aiming for)….
Sale £8 (1 album or 2 albums with a limited time offer)
Upsell £20 (several albums, videos etc…,a fans bundle!)
£120 per 10 people if 20% take upsell = £12 per person
833.33 people per year for £10,000 turnover
If 4% of your subscriber list are likely to buy then you need 20,833.25 subscribers per year
If you have a squeeze page converting at 20% then you need 104,166.25 visitors to your squeeze page per year
That means that if it costs £0.15 per website visit on Facebook then this will cost £15,624.94 per year on advertising.
Therefore making a loss of £5,624.94
I know that there is opportunity to make more sales and promotions once they are on your subscriber list but is Facebook really the way to go if this is what you can expect?
The only way I can see these numbers working is if the £20 is a yearly subscription….
This would give you an extra £16,666.60 the next year without need for advertising.
If you take away the loss from Facebook advertising then you make a profit of £11,041.66 over 2 years….doesn’t seem like a great percentage of the original money invested in advertising to me…however I’m not experienced in business!
The alternative is to make a monthly subscription, however this could be a hard sell for a band….
For arguments sake though if the subscription was £5 a month then thats £60 a year per upsell. that would mean….
Sale £8 (1 album or 2 albums with a limited time offer)
Upsell £60 (the yearly cost of a subscription paid £5 monthly)
£200 per 10 people = £20 per person.
500 people per year for £10,000 turnover
If 4% of your subscriber list are likely to buy then you need 12,500 subscribers per year
If you have a squeeze page converting at 20% then you need 62,500 visitors to your squeeze page per year
That means that if it costs £0.15 per website visit on Facebook then this will cost £9,375 per year on advertising.
Woohoo a profit!…however I think even the biggest bands in the world would struggle to sell a £60 a year subscription….most people probably don’t even use the paid version of spotify!
Have I maybe got confused somewhere along the line or done some bad maths, but subscription seems like the only way to go?
Without subscription is there any way to make the funnel work using Facebook Ads? and even with a more realistic subscription fee can it take less than the best part of 2 years to get any sort of profit?
Would be great if someone could help me out here and maybe explain if I’ve gone wrong somewhere…. or if you simply need to have the website click cost way lower than £0.15, or you need a higher value product to begin with?
Thanks
Jack
I think it might be best for you to calculate how much you can pay for ads and stop your ads if they start costing more than that amount.
If you have a £8 album and 25% of people buy the £20 up sell, then each buyer is worth £12 [8+(0.25 x 20) = 12]
If you have a 4% buy rate then each subscriber is worth £0.48. [0.04 x 12 = 0.48]
If your squeeze page is converting at 25% than you need to pay less than £0.12 to break even [0.48 X 0.25 = 0.12]
That means that you earn money below £0.12 per ad, and loose it above. The numbers will change on the effectiveness of your funnel (5% sales rate would allow £0.15 per ad, 30% conversion rate would allow £0.144 per ad, both would be £0.18) but you should be running ads as long as you can get that rate and stop the moment it goes above.
I dont think you are going to make a significant amount of money unless you start selling new stuff (new albums, live shows, etc.) to the people who are already on your list.
My personal goal is to build up the list as big as possible without loosing money before I release my new album this fall. I may even run ads at a slight loss to get people in my area (Los Angeles, California) to come to shows where I can get door fees and Tshirt sales.
Hope that helps.
-Adam
Hey guys,
It's a hard topic to discuss because there are so many variables here. And to be honest, my brain was getting fuzzy trying to think in pounds. But the math can be slid all over the place to make it work. But without a doubt, it's not usually a simple thing.
But I think Adam is dead on when he says that his focus is to build as big of a list as possible while breaking even, and then look to make his profit from future albums, merch, and shows.
But just to set your mind at ease. I've had quite a few students who have turned a profit without even having an upsell. And many more who have done it with just a single upsell.
But lets talk about just a few ways the math works. I'm going to work in dollars here is that's ok.
You spend .20 cents a click and convert at 33.3% (trying to make the math easy there but it's totally doable). You would spend $60 to get 100 subscribers. The normal conversion rate I see for sales ranges between 4 - 6%. I've seen 10% more than a few times and the highest I've ever seen is 30% (which is ridiculously high so don't count on it). But if just 6% of your audience buys a $10 album you break even without an upsell. I recommend trying to get your price point on the upsell to be between $30 - $40. If 20% of your customers take your $30 upsell (I shoot for 30%) then you make $36 profit on $60 spent. That's a 60% return on your money which is great by any standard. Now add a membership site to your offerings, and then add live shows, house concerts, internet concerts, and merch. There is potentially a lot of money there once your list gets to be a decent size. And better yet, you could theoretically stop spending money on advertising and the list would keep paying you indefinitely, so long as you kept getting offers in front of them.
Adam is also dead on, in that the focus needs to be on subscriber value. The more you can generate from each subscriber, the less you need to stress about what you spend on clicks.
It's not always going to be as easy as the math above, but sometimes it will be even better. It's a sometimes scary process of refinement. But a big list is incredibly valuable. And at the end of the day, if you can't refine your funnel enough to make ads work for you, you can still feed the funnel with organic traffic from live shows and social media sites, and you'll make infinitely more money than you would otherwise.
That all make sense?
Phew, that was a long one.
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Thanks Adam and John,
That perspective helps a load. keeping a the subscriber value is definitely a much simpler way to think of things.
So I'll be planning to keep the subscriber value at 15p and below and by the 2nd year I'll be aiming to start making profit...plus selling promotions to the people already on the list.
My plan is to take a look at my whole funnel in the same way that Jon Chobra did and then continue with the Ads that had been working for me.
From reading Jon Chobras experience I can tell that I'm best changing a bit of language in the email series and squeeze page.
Thanks again guys!
Good Luck with your Ads Adam....I'll go add a reply to that topic now on what worked for me.
Cheers,
Jack
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