Brandon Bateman 0:05

Hello, and welcome back to another episode of the collective clicks podcast. This is your host, Brandon Bateman. And today I'm joined by Garrett Craig in our. I don't even know what we call him or our professional marketer internally. One of the best paid ads geniuses. I know we're going to talk all about the metrics that you're measuring campaigns by and how this can mislead you. We'll talk about different metrics that you should focus on at different points and why the answer is not as simple as you might think as to where in the funnel you should be looking for your optimization. How you doing today, Garrett? Doing good. How are you? Hey, awesome. Excited for episode number who knows what of the collective clicks podcast. I think it's number 3, 000. 3, 000. Okay. 3, 000. Big day. Yep. Big day for us. 3, 000 episodes. Yep. So today the, plan is to talk about metrics, which we do a lot. So, if you're surprised then, you probably haven't been here before. But let's talk about specific metrics that people measure their marketing by, because it turns out what you measure and how you feel about it really affects what you do with your business. It affects the kind of actions that you take. And everybody has their own metrics that they that they think are most important for a marketing campaign to measure it in different ways that they optimize and, all those types of things. So I'm really excited to dig deep into all that and find out what are the real metrics that matter and how do they interact with each other? What do you think when you're measuring a marketing campaign is the most important metric to keep an eye on?

Garret Cragun 1:38

I think it depends a lot on the goal of the campaign. For instance if, I'm running some TV ads, then I'm probably not going to Have that be measured on our on, on just a pure cost per contract basis. Cause that's not the, full intention of the campaign. That's not the only, that's not the only reason why it's active. And so I, think in part, it depends on the, on... The goal of the campaign, but that's more of an aside and that's me talking as an agency employee, right? but I think the To speak out of both sides of my mouth I think it's important to focus primarily on the bottom funnel metrics and by that the revenue tied metrics because if those aren't there then you're optimizing for the wrong things, and you're going to get the wrong outcomes. I think at the heart of things, it's important to have the, core of your, measurement be based on as close to revenue as possible and, as close to revenue as that campaign is going to be tied to. If that makes any sense

Brandon Bateman 3:04

at all. Yeah I, totally agree. I think since the beginning of time marketing companies and normal companies that hire marketing companies, what do you call them? Like clients and this is what we would call them. I think they've always had friction on these specific metrics. I think like the most stereotypical example is, the the company paying for the marketing is like I need revenue. And then the marketing agency is you got a lot of impressions. You got a lot of clicks. You got a lot of leads or whatever the case is. And really the main difference here is that we're just looking at different points in the funnel, right? There's a top of the funnel and then there's the bottom of the funnel. And that's what you mentioned, right? You want to stay in the bottom of funnel closer to revenue. And I've seen a couple of people in different camps and honestly, I don't I don't think I. Fall like fully in one versus the other. I'm really curious to hear your perspective because you'll find investors that are like ROI is the only thing that matters. And while I believe that is true. I think that leads us down paths that aren't good. Sometimes extreme example, let's just say you let's just say you spent 10, 000 on one lead that one lead, Turns out it closes into a contract and that contract turns into a deal and you make 100, 000 on that deal. It technically worked, right? The result is there. However, is that process repeatable and is likely to continue to provide that outcome? You're probably not going to find any marketing channel where you close every lead, right? So you probably were a little bit lucky. So it didn't make sense. Sometimes I compare this to let's just say we're talking like. Investing, not like real estate investing, but just investing in general, right? You have an investment manager where their job is to make returns on money. So, I give like 10, 000 to two investment managers and one of them invests it in the S and P 500. And two, two years later we have a 24% return and it's 11% IRR or whatever the case is. And then someone else buys lottery tickets with the 10, 000 and we just win the Powerball and. Now we have this like insanely high return, right? Who's the better investment manager? If you're purely results focused, then it's the guy who bought the lottery tickets. If you're more of a process. Driven person where you care about the, underlying aspects there and like the repeatability and the, sample size and how that affects things, then it's, not the person who bought the lottery tickets because on average, that's going to make you fail. Yeah. So, anyways I view it both ways, right? Like on one hand, the the bottom of funnel metrics are the most important thing. However, I like to look at the funnel too, because if you're getting those bottom of funnel metrics, but the rest of the metrics don't look natural, then. It's very likely that you're just running into good results, but due to a small sample size. And that can be really dangerous because if you're choosing to double down on your marketing channel based on having a 10x return, when that's not actually repeatable, then you're gonna waste a lot of money.

Garret Cragun 6:09

Yeah, and I think first of all, I thought, what is the average cost per winning ticket from the lottery? Cause that's making me really rethink my buying decisions, cause you make a good point. I could just put all my earnings into the lottery. Lottery and it might be a good idea. But back to the main point. I, think there, when you are, looking at the bottom of the funnel there's, a few metrics that you have to consider in real estate to see if you're, like, working off of small sample size or a skewed sample and I, think for me and, if there's, any that I'm missing here, let me know. But I think that the, first one is, gonna be the profit, right? Of of the fees that we collect minus what we spent on the, on just the ad platform. The second is, going to be the cost per deal which is not going to take into account the, difference in value of those deals. And, then the, third is the, appointment to deal ratio, and I think if any of those three seems off then you probably need to look a little bit higher in the funnel to see if as That campaign runs longer are those going to hold steady? and so you have to look at the efficiency the net And the volume of your funnel to get a really good idea of the full story because I can have a like 1, 000 cost per deal, but my spreads are 5, 000 each. And that's not a win. But if I have the, inverse and have huge deal spreads, but those deals cost a bit more, that can be a win still. And so you have to look at. All of those metrics when assessing the campaign and if like you said, if those don't look very like real and predictable, then you probably need to look further up the funnel.

Brandon Bateman 8:42

Yeah. What about so really common talked about metric. This is probably the most about when people are talking to us in our sales process, which it makes me a little bit upset that it's the most common metric asked about. Cause I don't think Spoiler. I don't think it's the most important one. But what about cost per lead?

Garret Cragun 9:03

Famous metric. Yeah. So I, it's a, so with cost per lead there, there's a lot that you can control, which is. The bulk of, what we talk about on this podcast, right? Like things that you can do in your marketing to bring down your cost per lead and bring up the quality things like better keywords, better ad copy, better tracking, better. page performance all of, those things can impact y your cost per lead, but there's a lot that you can't control about your cost per lead that's very market driven, not marketing driven. Things like the, size of the area you're targeting, the channel that you're working in. The number of, other investors in your, market there, there's a lot that you can't control and that you can't predict. So if, you base your marketing on just cost per lead, that doesn't take into account the, lower stages of the funnel as far as how are those leads going to turn into appointments? How are those appointments going to close? And what's the deal spread of those contracts? And if you're just looking at cost per lead, then you're going to basically always choose the channels that have the lowest cost per lead and don't always have the, best deal spreads will always have the best motivation or don't have the fastest cash cycles. So I think that's probably worth considering when looking at what seems like the golden standard of metrics. When it's, it misses a lot of the deeper gray area that probably needs to be considered.

Brandon Bateman 10:56

Yeah it's a really nuanced metric too, because everybody defines lead differently. I've noticed I've had a few conversations with investors recently where there are like five different metrics that were pretty much used interchangeably throughout the entire conversation. And it creates a lot of confusion because we're not talking about the same things. So I, really, I firmly believe that we need to like. Have some type of standard of what do different things mean? Because it creates so many communication issues and I've noticed like the same person will say lead, but mean a different thing each time they say it. Oh, in this case, I'm talking about leads that are like really good that I can have an appointment with, and in this other case, I'm talking about like. real leads. My favorite word is real leads. What does that mean? Yeah, there's so many different like that could be defined like

Garret Cragun 11:43

10 different ways. A person, an actual human being. Yes.

Brandon Bateman 11:48

But some leads aren't quote unquote real leads for a whole bunch of different reasons. Yeah, and I think people generally fall into two camps and I don't like the two camps. I think there's like a middle ground that makes sense where there's on one side you have the like really lead cost focused where it's all about Getting a lead at the right cost and then on the other side you have this like quality focus where it's like I don't care what it costs. I just want quality leads. What I've noticed about every one of the people that's ever said that is they really care about it what it costs, too Yeah Someone brought it up to me recently. They said they heard on a podcast if you want Ferrari deals You got to pay for a Ferrari leads. What do you think about that?

Garret Cragun 12:31

I think it, it sounds really good on the surface and it it's, a great phrase. And I think there is some truth to it where if you want to get above market value, you can't pay like and that's probably a bad way of phrasing it for our audience, but if you're wanting high quality leads, you have to be willing to pay at least what other people are willing to pay for it, and I think that's true, I think that you can't over emphasize the best leads at the expense of volume, I think that's the only thing I would say, but I think overall It, is fair to expect that the best leads are, the best leads for a reason. And if y if, you know that, then it's likely that other people also know that and it's gonna be hard to change those market dynamics too much.

Brandon Bateman 13:38

Yeah, it's yeah, I do think it's a great way to say it. That hits home for a lot of people that are it's, funny cause it just depends on who's hearing it, right? If, I'm telling you, you need to get. And I think everybody just assumes if your lead quality gets better than your you're the person who's already focused on lead quality, then you create some type of idea of we've even seen some of our clients where they go so far, pushing quality up and you can get pretty far down that road if you want to, but you get to these points where like your quality is improved by 20% and you're paying three times more per lead. And I think everybody just assumes if your lead quality gets better than your cost per deal goes down. That's not true. If you were to keep the cost per lead the same and make lead quality better, then you're better off. But if you have to inflate the cost really significantly to get the quality a little bit higher, it just doesn't make sense. So that's where people are sometimes a little bit confused when I say that, like optimizing towards return on investment and optimizing towards lead quality are two different things. They, will get you different outcomes and sometimes improving your lead quality and paying more per lead is actually a good move. But there's a diminishing return on that and you can push that farther and farther until you're filtering out like all the leads except for the one that you think is the best lead ever and you pay a ton of money for it. But then if it doesn't close, you're you're not going to do very well.

Garret Cragun 15:04

And, then I think that that I think there also is the idea of the incremental value of an additional deal. If you're focusing so much on just getting those top line leads, then you're losing out on, those more like medium quality leads that, that could help you get that, that next incremental like amount of. Of revenue and so I, think that's where looking only at cost per lead and cost per deal is flawed because that's not taking into account those other metrics of the, return on, on, on investment as well as the net profit of your campaigns. If you're so over focusing on just efficiency you, can end up like being your, own worst enemy by, by actually under. Driving volume and being in the red, even if you have this screaming good cost metric, if there isn't volume, you still lose.

Brandon Bateman 16:09

Yeah. It's almost the, real only good strategy is just the one that your competition's not doing in the sense that that's where you find the, these undervalued leads, right? That's, a word I like to use. Undervalued, right? You don't, as a real estate investor, you don't go into a market and say that house is worth a million dollars. You can say the same about a hundred thousand dollar house, right? Oh, there's a price that you could buy that house at where it's a good deal for you. So there, it's all about finding that sweet spot, which often depends on what your competition's doing. Cause if they're just focused on volume of leads, which I seen I, find tends to happen, especially with larger companies where they have like marketing held accountable to lead generation. And you have acquisitions held accountable to closing of those leads. Then marketing just does what they're supposed to do, which is drive as many leads as they possibly can. And then they say it's acquisitions fault. They're not closing those leads. And then acquisitions says these

Garret Cragun 17:12

things are bad. It's, all marketing's fault. They're bringing in bad

Brandon Bateman 17:15

leads. So you have this like friction between them versus when we have just like a solo owner operator of a business, they tend to be really focused on the quality because they feel like they control the whole thing and they have the, more the salesperson perspective. But it's it really is a mix between both of them that you have to carry about care about, because sometimes the way to win is actually lowering the quality. What if you could lower your lead quality 10% and get three times as many leads? That'd be a huge win, right? And then sometimes it's a, it's about just increasing that quality really significantly. And they both make a difference at the right time. How do you find that hole though? Like where, your competitors are just not focused.

Garret Cragun 17:55

That's a very good question. If we're speaking more to PPC, because I think that's probably where our audience cares more it's, all about finding those, keywords, that you are seeing a better A better cost per click and a better return than your average. And I think that comes down not only to your average but benchmarks for your market and, for your area, which if you want those benchmarks they are found with us. And so I, think if you know what's what, can be achieved versus what you're seeing then it's easier to find those, hidden nuggets of value. But it takes some knowledge of the benchmarks to be able to identify what's a win versus what's a less bad outcome. Yeah.

Brandon Bateman 19:08

All right. One, one final thing that I want to discuss that I think is, interesting is how do you measure lead quality?

Garret Cragun 19:19

I, have a thought but, I'd love to hear yours. I

Brandon Bateman 19:23

see you're planning a negotiation.

Garret Cragun 19:25

That's right. I'll give mine and then I, want to hear your, Yeah. Better one. I think quality for me is Tied to Okay, I'm gonna hedge but it's for a good reason. I think it's the Percentage of leads that take the action that's nearest Revenue that you have enough volume to have a big enough sample size Yes, that's all

Brandon Bateman 19:53

of that. I'm not sure that's

Garret Cragun 19:54

what I would say. So let's say that each month, you get two, two deals. It's, very hard to, use leads to a deal as your number for quality. Cause, let's say there's a third deal that comes through, and it's your next lead. Then all of a sudden that, that, looks like like, a killer metric. But there's not enough sample size to have that be meaningful. That's why... I, would say the, lowest funnel metric that you have enough, and again, enough is so subjective. Sorry I'm, a marketer, so it's always gonna be, it depends, but I think that's, the number is like whichever stage in, in the funnel that's going to be least impacted by the next lead. Being that action is probably where I, would use to gauge quality. Does that make sense at all? Oh,

Brandon Bateman 20:56

it absolutely does. It's, the concept of measure as deep in the funnel as you can with a relevant sample size. That was much better. It's, just a different way to explain it. But it's, I, and I, almost didn't understand how I view things until you said that. And I'm like, wait, yes, that's how I view things. Because it's of course we care about the deepest in the funnel metrics. But if they don't have the sample size that's relevant for us to make good decisions, then we have to go higher up in the funnel. It's, better to have a high sample size with a less relevant metric than a low sample size with the relevant metric. That's of course a generalization because it depends on how big the sample size is and how relevant the metric is. So there's there's all those things. I can share also a little bit about like how we measure lead quality and and what we've done with a lot of our clients. So we put leads into different buckets. If a lead comes in, it's just a phone call. It's a form submission. We call that a gross lead. If it's like spam or they're a buyer, like clearly not interested, like something like that, we would say that's not a net lead. So you might have a hundred leads come in and then you might have. Where that's what I would call like a real lead it's not like a fake phone number or something like that of those, you won't contact every one of them, right? So, you have some type of contact rate and then you reach theoretically contacted seller leads. These are people that you've been able to get to answer the phone and they have a house to sell. Not every single one of those people is going to be an opportunity because some of them want retail or they're unqualified in other ways. Like, maybe they're just not in your target location or it's a mobile home and you don't like mobile homes or whatever the case is. And then you get to opportunities and then some opportunities turn into contracts. The thing that kills me about all these metrics though, is they're so difficult. Like I could tell you one of the things that we've been running up against more often recently is paper lead. So paper leads is interesting concept because what they're basically arguing is that you have to pay for net leads. So if it's any of these things that like, it doesn't meet the qualification criteria, then they refund you. And you look in the cost per leads are pretty low, right? So sometimes when we're in conversations with people, they're looking at it and saying okay, maybe I could have a 300 cost per lead with you, but the paper leads 250 and I don't have to pay a management fee and I get it refunded if it doesn't match certain criteria. And then we look at it and they have a worse return on investment on paper lead. And it seems to happen over and over again. So I don't know what these paper lead companies are doing, but it's interesting because like you can have something still match the same criteria, like an opportunity, for example, but be of a different level of quality. And some of it comes down to like how it was generated. There's always like a range of quality. And we find that most of our clients doing paper lead have close to double the number of leads per contract as they do with their own PPC which is a, wild idea because they're supposed to be PPC leads still. Yeah. I don't know if you have any thoughts on that or why that could be. I know we've seen some element of that, like between Facebook and Google, like Facebook generally requiring more opportunities per contract. Even though the opportunities are defined the same way, it's just like the jet, the way that the lead is generated affects the quality. That's something to really keep in mind because if you have. If you do focus on any of these metrics that aren't just the end funnel metric, there's always some way to be misled. And, that's something that that gets us even with paper lead where you're saying like, okay, it should be a search lead and it matches these criteria and it's at this cost. It doesn't pencil out for some

Garret Cragun 24:22

reason. Yeah I, think I don't want to get too deep into pay per click versus pay per lead because that's, a whole different podcast, but I, think that is a case study in the value of looking as deep in the funnel as you can, because on the surface it looks great and if I were an investor looking at, just cost per lead, I would dump everything I had, my life savings, my 401k into pay per click. Paper lead, because wow that's, a screaming cost per lead. But then, if I were looking deep in the funnel, I probably would hold out on putting my kids like a college fund into it, because those numbers don't hold steady down the funnel. So I think that's an example of why you should look at the whole picture, because What looks good on the surface might not translate as effectively into revenue. And looking at just apples, that's not that's more apples to oranges. If you really look at it, how it performs deeper down in the process.

Brandon Bateman 25:26

Yeah, it probably another way that it's a case study for looking deep in the funnel is. You can see like why did we reach each of these metrics just by what the company is generating the leads are focusing on Because if you're doing your own PPC, it's closing focused from the very beginning, right? And that's gonna naturally just push all the quality levers as high as you can. If you're looking at paper lead What is the goal? Create the max number of non refundable leads. Best margin. Yes. Yeah Which you can't blame Paperlead for it, but I think it's, that's a flaw with the model, right? Where Paperlead their, goal is to sell these leads for as expensive as possible and not get refunds. And it's the only way to be. Profitable and they don't have great margins even in the best of scenarios. So I'm not like talking dirt about paper companies, but it's some, like aspect of just how the agreement is structured that just naturally leads to an optimization point higher up in the funnel. Anytime you have a higher up in the funnel optimization point, you can expect a lower quality. Yeah.

Garret Cragun 26:24

Any last words? No, I think that this, was a great summary of how to analyze data. I hope I, I didn't speak in riddles in this

Brandon Bateman 26:38

episode. You marketers with your with your riddle speak. A

Garret Cragun 26:41

bunch of jargon to confuse the masses. That's me.

Brandon Bateman 26:45

You just confuse them into spending more money with you, right? Is that how marketing companies work?

Garret Cragun 26:49

Yes, exactly. We optimize for up in the funnel, right?

Brandon Bateman 26:54

Yes. Up in the funnel of confusion. That's right. Yes it's been awesome. Hope this episode has value for everybody listening as well. And I will see you next time.