More profits with simple math

Last week, I told you how you can track your website visitors and use it to your advantage. Retargeting is a powerful tool. But before you retarget anything, we should think about the return on investment. 

In the creative world – especially when talking to musicians and other artists – the term return on investment (short: ROI) is prejudiced. From my experience, many artists think that it is some evil sales thing. It’s not. In fact, knowing your ROIs is of utmost importance if you’re building a profitable business. 

Hopefully, I won’t dive too deep into the world of advertising, marketing and sales here. If I do, scream “STOP!” at the top of your lungs, and send me a raving message. Or skip that screaming part and leave me a message so I can help you. 

(I leave that to you.)

So let’s say you invest 180 dollars per month on Facebook ads. That’s around six bucks per day. Your running ad is a simple message targeted to people that like the music of a more popular artist in your niche. In the ad, you tell the audience about one of your songs. The ad links to your website. On the website, you’re inviting them to subscribe to your mailing list. And you track all visitors with a Facebook pixel and Google Analytics.

We assume that you get a click per 0.15 dollars, resulting in 40 new visitors each day. So you have 40 more people that could be interested in you. Out of these 40, there’s a 25% chance (average) that they subscribe to your mailing list. You basically “bought” every mailing list subscriber for 0.60 dollars. 

In your mailing list, you welcome them with a series of pre-written fully automated emails so they get to know you. After some time – if they read your emails – it’s possible that they like you. Now you finally send them an offer. A quite usual conversion rate is 10%. Let’s assume this conversation rate for you, too. If one out of ten subscribers buys something, you now “paid” them 6 dollars to do so.

Six bucks to get someone to buy from you… Sounds good? I think that sounds more than good. That’s super amazing! If you sell them something for nine bucks, you already made three bucks profit. This profit margin – the difference between how much money you spent to earn money – is called return on investment. You invest six bucks to make a profit of three bucks. Simple math 🙂

Some things to consider: Depending on where you live (Europe for me), don’t forget about consumer taxes such as VAT. Also, think about production costs. If you sell something for nine bucks but it costs you three bucks to produce it, selling it for nine bucks would result in zero balance. Better sell it for ten – or more.

However, this is just the first step in the lifetime of your customers. So don’t be too harsh with prices. Better invest some money without a short term return in order to get a lot more in the long term – and living from your music, hah!

Once someone bought from you, there’s a seven times higher chance of them getting back for more than with new customers. And that is proven science! So if you get them to invest a few bucks in you – and you overdeliver with your product – they will probably return.

This means that you now have paid six bucks for a potential lifetime customer. If they pay your next tier of products, you earn exponentially more money. And if you’re good, your customers tell their friends about you.

I hope that I kept it somewhat simple. At least, I tried. 🙂 If you got questions about this stuff, I’m here to help.

I read and reply to every message.

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