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Improve Your Marketing Through Blacklisting

This blog was originally posted on Business.com. Click here to read the original version in full written by Shaun Overton of Engineer ROI who used our in-house client Standish Salon Goods as a case study. 

What percentage of site visitors are good leads versus bad leads?

Chances are that most visitors are probably bad leads. Get faster, more meaningful A/B tests by building blacklists instead of testing the minority.

The best clients are the whales. You occasionally get a monster order out of nowhere that pushes your monthly profit through the roof. These clients help keep your business afloat and help you excel. How do you find more whales?

Your business follows the 80-20 rule.

Have you ever heard of the 80-20 rule? The maxim is that 80 percent of your revenue comes from 20 percent of the customers.

Shaun looked at a case study from Reap’s own client, Standish Salon Goods, a website that our agency launched that sells salon furniture. When we hired Engineer ROI to analyze our website, one of the main goals was to profile the difference between customers that spend a little money and a lot of money.

What does that look like for Standish?

  • The top 15 percent of customers generate 65 percent of revenue
  • The remaining 85 percent only generate 35 percent of revenue

The 80-20 “rule” is more like a “rule of thumb.” Using it gave their team a rough idea of what to expect from Standish’s sales before they knew what they were.

If you want to optimize your marketing to high-value customers, your first steps are listed below:

  1. Compile your list of customers. Mark the ones you deem “high value.” If you aren’t sure where to draw the line, then assign your top 20 percent of customers as “high value.”
  2. Identify what is different about your best customers compared to your lowest value customers.

You don’t necessarily want to get rid of the bad customers. But it might make sense to stop paying for traffic that brings your lowest value customers to your site. That’s the 80-20 rule in action.

Have you noticed that your lowest value customers are the ones most likely to complain, take employee time and leave unjustified, negative reviews? Stop paying to bring these people to your business!

Sifting through gold and fool’s gold.

Part of Shaun’s engagement with us was to identify the value of Standish’s funnels. We had about 15 different lead magnets, but he noticed that each lead magnet type fell into three categories: financing, aspirational and discounts.

When looking at the revenue generated per lead, Shaun noticed that the finance leads generated 2,847 times more revenue per lead than aspirational leads.

The conclusion? Very few people that want to open a salon actually follow through. And when you think about it, opening a salon isn’t a great idea. The average hair stylist earns between $25,000 to $45,000 per year.

It’s a lot like coffee shops. People like the idea of owning a coffee shop. Very few people that own coffee shops have a unique selling point. Many shops are cool, but they are mostly the same. Their key differentiator is usually location.

If you start paying attention during your next boring commute, look at all four corners of each intersection where you wait. You’ll notice the same types of stores – men’s barbershops, stylists for women and nail salons – buried in the middle units of strip malls.

People like looking good and their nails keep growing, so they make the conclusion that it’d be fun to perform those activities as a business.

What’s different about finance leads?

One fortunate aspect of the Standish Finance Application is that we ask applicants the question, “How long have you been in business?”

More than 55% of the finance leads have been in business for at least one year. It’s not simply the idea of financing that makes them good prospects. It’s also the fact that they’re the cream of the crop in terms of business performance.

Very few people want to keep operating a salon after five years of scraping by on $25,000 a year. These business owners don’t want to spend $30,000 to remodel their business.

The data allowed Shaun and his team to pinpoint a single factor that helped them decide if a lead is worth hundreds of dollars or just pennies. By asking, “Do you own an existing salon?” we learn quite a bit.

“Yes” is the gold. These people went beyond thinking it would be a cool idea to create a salon. They actually started their business, showing initiative and drive. 

“No” is the fool’s gold.

Create your blacklist.

The Engineer ROI team knows from both data and from our experience that the vast majority of Standish visitors are low-value. Most visitors dream of opening a salon. They don’t actually have one. Only a tiny fraction of visitors own existing, successful salons.

It’s easier with that kind of skew to focus on excluding people than including them. How do we optimize the site so that visitors tell us the information?

Shaun’s initial thoughts were to use existing lead magnets like “The Salon Opening Checklist.” Anyone that clicks or hovers over the link too long is probably aspirational. Then we could fire off events in Google Analytics, AdWords, Facebook and whatever other pixels you use to track remarketing.

Here’s the sequence of events:

  1. A first time visitor sees a product page for a red salon chair. She came from Google.
  2. She hovers for a few seconds over a sidebar link that offers her “The Salon Opening Checklist”.
  3. Poof! An event fires so that we know not to retarget her. Not on Google, not on Facebook or AdRoll. She’s blacklisted.

Is a blacklist right for your business?

Blacklists are best suited for businesses with long sales cycles. If your advertising strategy depends heavily on remarketing, that’s you.

Whether or not to pursue a blacklist approach to remarketing involves gathering high-level information about your ad spending.

  1. What’s your monthly budget dedicated to cold traffic?
  2. What’s your monthly retargeting budget across all platforms?
  3. How big is the retargeting budget compared to the cold traffic budget?

If these bulleted points are true, then it makes sense to build a retargeting blacklist.

  • You have a ton of bad leads like “aspirational salon owners.”
  • Those bad leads wash out your good leads like “existing salon owners.”
  • Your remarketing budget is at least 30 percent of your monthly spending.

You have the opportunity to take a hatchet to the remarketing spending without affecting overall sales.

Let’s say, for example, that you spend $4,000 a month on retargeting. Through CRO appealing to the bad leads, you are able to blacklist 40 percent of the traffic and drop your retargeting ad spend to $2,400 (60 percent of $4,000).

Nothing about the ads changed. All you did was flag that worst audience and stop spending money on showing them ads. It’s a very easy change that can fundamentally shift the profitability of your campaigns.

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