a single source, nothing corroborates it

Do the ad arithmetic before you pick the category

Divide the suggested bid into your price and you get the conversion rate the channel would demand: at a dollar fifty a click, a ten dollar product needs fifteen percent of clickers to buy, which nothing does. The same test at the email step showed seventeen percent capture at nearly two and a half dollars an address, which is unusable at that price. Some product types simply cannot be marketed profitably, so check that a customer is worth more than they cost before you commit to building for them.

The method

1. 01

   Work out your cost per captured email before treating paid search as a growth channel; a few dollars per address makes it unusable for a low-priced product.

2. 02

   Do the paid-acquisition arithmetic before you count on ads: divide the suggested bid into your price to get the conversion rate you would need, and reject the channel if that rate is implausible.

3. 03

   Check that acquisition cost sits below lifetime value before choosing the category at all - some product types cannot be marketed profitably.

What it returned

• 7

  Zue converted 7 of 41 ad clicks (about 17%) into email addresses at $2.45 per address, and concluded that acquisition through ads would be an uphill fight.

• $1.50

  With Google suggesting about $1.50 per click on high-competition place card terms, a $10 product would need to convert 15% of clickers, or 7.5% at double the price.

• $100

  Spending $100 to win a customer worth $80 loses money; mobile apps are hard to market because a lifetime value near $2 leaves nothing to spend.

Sources

• It's not enough to build a product that people wantJustin Jackson · justinjackson.ca · Customers have to give you more money than they cost · undated
• Testing an MVP with Google Ads and AnalyticsCory Zue · coryzue.com · Is the product valuable? · 2017-05-17
• The Place Card TeardownCory Zue · coryzue.com · The unit economics of advertising don’t work · 2017-04-30