Running ads is the fastest way to get customers. You can literally start a business today – and target anybody you want in the next 30 minutes.
So why aren't more businesses running ads?
I think there are two reasons.
- They're afraid of spending and not making anything back.
- They're afraid of a Pyrrhic Victory.
What's a pyrrhic victory?
Ahh, it's something so common in advertising, anyone who runs ads would have experienced it.
A pyrrhic victory is when you win a war, but suffer so much losses you cannot continue to fight another battle.
This expression came from King Pyrrhus of ancient Greece, who defeated the Romans but had a huge loss of soldiers – so much that they could not continue to fight another battle.
It's hard to be profitable with just ads (My experience advertising Underdog Con)
Many businesses want to be profitable from ads. They dream of a world where they run ads and people buy their products. Happy days.
But that's becoming more difficult.
With more businesses advertising, the cost of advertising will only increase.
That means, your cost of acquisition (CAC) will continue to rise, to the point where even if you close a sale – you'll be experiencing a Pyrrhic victory.
Last week, I started advertising Underdog Influence Con. Check out the cost of acquisition in the screenshot below:
A ticket for Underdog Influence Con is RM329.
Assuming I acquired most of the attendees at RM164.78 (third ad set), I wouldn't be making a profit at all – let alone cover the cost.
Ways to Turn Profit
Here's what most businesses do.
- Create upsells.
- Ask customers to refer others.
- Create an affiliate program.
- Build out an organic system.
Upsells are not necessarily a bad thing. When you go for the RM1 upsize at McDonald's, it's an added value, not a scam.
Upsells simply got a bad rep, because marketers realized it's difficult to be profitable through ads alone and started creating products that provided no big value – just for the sake of implementing an upsell.
So what type of upsells work?
Here's the secret: When you solve a problem with your business, you unintentionally create another problem. When a car dealership sells a car, it creates a new problem for the buyer; the need to buy insurance. That's why you notice car dealerships also offering car insurance as an upsell.
Your upsell should focus on solving new problems you create, after solving your customer's initial problem.
2. Ask customers to refer
When somebody buys from you, it means they already believe in you. This is the best time to ask for a referral.
The best referrals are organic.
But does not mean you can't build a referral system in your business.
One of the most successful referral examples is Dropbox. As a user, you could refer other friends and get rewarded with extra space when they sign up.
3. Affiliate programs
Almost the same as referrals, just that with an affiliate program, you give a monetary reward.
Affiliate programs are usually more difficult to set up successfully. But done well, they can be extremely powerful.
For example, Shopback is a business entirely built on affiliate programs.
The problem is most affiliates are in it just for the money and not because they actually love your product – so I'd advise exploring affiliate programs at a later stage of your business.
Getting customers organically is one of the best things that can happen for your business.
Things like SEO, email marketing, and creating content all contribute to your organic channel. They don't cost anything at the moment of transaction. But the legwork has all been done months and years before.
The good news is once you build a brand and an audience, your organic channel will begin to run on its own.
This is also why I'm focused on building an audience at Daily CMO. Building an organic channel takes time but it's something you've to start today.