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What matters is the bottom line of your business, not your conversion rates in and of themselves. Let me give you an example: Charles sells financial services

What matters is the bottom line of your business, not your conversion rates in and of themselves. Let me give you an example: Charles sells financial services and a conversion for him is worth $4000 dollars on average. Paying $100 per conversion is a great deal. Paying $500 per conversion still makes financial sense. Tim sells ring tones and conversions are worth $1.50 for him. Paying $100 per conversion won't make sense here, but paying $0.15 wouldn't be too bad. Figure out how much you will make per customer and set the upper limit of your conversion cost to 33% of that price and you'll be on the right track.

triviatise 16y ago
right now we dont have revenue, we are just experimenting with customer acquisition to find out how much it actually costs.
- bmelton 16y ago
  You'll likely find that how much it costs is a variable factor, where the cost of your service is the variable. Given the above analogies, a ringtone service has a lower barrier to acquisition, since the average purchase price of the customer is much, much lower than, say, a financial service. If you can get customers for $0.15, and your service costs $20 a month, you're doing a mind-blowingly good job. The cost of acquisition will generally rise as the cost of your service goes up, and that is expected. There are 'tipping points', which is to say, you might keep about the same cost of acquisition for a service that costs $10 vs a service that costs $15, but if that service goes up to $100, then you should expect your cost of acquisition to rise as well. The magic is in finding the sweet spot, where the cost of acquisition per dollar sold ratio is the best you can get, but in order to truly measure that, you'll likely need to know the expected lifetime revenue of a given customer, which you're going to have a hard time measuring with early numbers.

triviatise 16y ago

right now we dont have revenue, we are just experimenting with customer acquisition to find out how much it actually costs.

bmelton 16y ago
You'll likely find that how much it costs is a variable factor, where the cost of your service is the variable. Given the above analogies, a ringtone service has a lower barrier to acquisition, since the average purchase price of the customer is much, much lower than, say, a financial service. If you can get customers for $0.15, and your service costs $20 a month, you're doing a mind-blowingly good job. The cost of acquisition will generally rise as the cost of your service goes up, and that is expected. There are 'tipping points', which is to say, you might keep about the same cost of acquisition for a service that costs $10 vs a service that costs $15, but if that service goes up to $100, then you should expect your cost of acquisition to rise as well. The magic is in finding the sweet spot, where the cost of acquisition per dollar sold ratio is the best you can get, but in order to truly measure that, you'll likely need to know the expected lifetime revenue of a given customer, which you're going to have a hard time measuring with early numbers.