by Madelynne Jones
When a group of geeks gather in a basement, something big is about to happen. Hayseed Ventures hosted its kickoff lecture series in the basement of the old Fayetteville post office building August 19, with Hayseed founder John James, formerly of Acumen brands.
Future dates and speakers will be released via Hayseed’s Facebook page.
James opened the lecture series by speaking about his customer acquisition model.
There are five places to place ads today, James began: search, social, display, re-targeting, and ad buys.
“Don’t even bother with display” James said, crossing it off the list. Banner ads seldom perform on their own, he added. After re-targeting, banners are definitely affective, retaining the customer’s awareness of the product. Cookies should also be dropped after the customer has visited your website. But not directly after or else the customer will be freaked out. The sweet spot, James said, is to send the customer an email shortly after they visited your site (about 10 minutes) and entered their email, and then drop cookies a few days later in banner ads.
James found the sweet spot of adwords back in college, when simple and vague adwords were really cheap. Nowadays that’s a lot harder, he said. He recommends buying more specific words that you can tie to your brand.
For example, when James first started, he could buy a word like “grill” for dirt cheap. This allowed him to buy a cheap word and build a product around it. Anytime someone searched those broad terms, his product was one of the first items the searcher saw. James first cornered the grill market with his brother in the early 2000’s, becoming one of the largest online grill distributors. He repeated success again by discovering the vast and eager-to-purchase demographic behind those searching for “cowboy boots,” “boots” or “red boots.” This demographic–white, middle-aged, country women who liked country music and rodeos–were likely to search and purchase products associated with the adwords he had bought.
Once James captured someone searching for a product and they accessed his site, he then made the site only accessible if they gave an email address. “A lot of people said no one would ever do that (give up their email before entering a site),” James said, “but they did!” This allowed James to have direct contact with a customer’s inbox, their very home online. And it made a huge difference, increasing sales and overall lifetime purchases.
The best way to acquire customers is through emails, James said. His former company, Country Outfitter, a cowboy boots retailer, gained a huge following through email acquisition, which, he said, essentially made the customer offer their “home online address” also known as a personal email, and gave them direct access to customers.
The most difficult part was finding the edge where people will stop opening emails, James said. But then he found new way–through cadence and cascade. Those who were most interested and opened frequently got more emails and deals, those less interested were dropped into an “uninterested/never email me again” pile, James joked. Unfortunately, that’s a pretty big chunk, he said. But those that often open emails are even more likely to make multiple life-time purchases.
James placed most of his trust in a volatile formula which focused on placing a greater value on lifetime purchase value than customer acquisition. After a long explanation of the mechanics behind his formula, James conceded the secret is really in the ratio. “You really want a 1:2.5 ratio of customer acquisition to lifetime value,” James said, meaning one should put more effort into encouraging a lifetime value of customer purchases rather than acquiring customers. A business person should be more concerned about the quality of a loyal customer rather than a quantity of one-purchase customers.
“Your biggest mistake is not having the ratio correct,” James said, “bidding too much on keywords, broad matching keywords, or not tracking your keywords. So often people don’t track what they’re doing.”
Though this model is used for James’ customers, he says he stole it from business-to-business models, which take longer to track and often rely on lead generation and conversion rate, but with clients more so than customers. Follow up is the most import part of the process, James said.
When asked about social network’s role in commerce, James said e-commerce through social networks like Instagram and Pinterest is the next big thing. But right now, it’s a tricky beast that everyone is still trying to figure out.
“Look for arbitrage opportunities,” James said of an overall secret to success. “Find the hole and fill it.”