Copywriting

How Much Is High-Converting Copy Worth to YOU? (No, Really, Calculate It Here)

So you have an e-commerce or SaaS website, and you’re starting to suspect that your sales copy … sucks.

Like, really sucks.

Ever since you launched your product, you’ve noticed symptoms of Toxic Copy Syndrome breaking out across your website like a bad case of acne.

Symptoms such as:

  1. Bounce rates so high you don’t even check GA anymore.
  2. Email campaigns that generate as much enthusiasm as a letter from the IRS.
  3. An alarmingly sieve-like unsubscribe rate.
  4. Leads that appear to have Alzheimer’s, because they can’t ever seem to remember what your product actually does and why they should care.

You finally decide to bring in a fixer — also known as a professional copywriter. But like most startup owners, you’ve never hired a copywriter before and don’t have a clue what you should pay for one.

At one end of the spectrum, you’ve got freelancers on oDesk claiming they can produce “killer copy” for $12 an hour. At the other, you’ve got premium CRO consultants cheerily citing rates 10 to 20 times pricier without batting an eyelash.

What gives? How much SHOULD you pay for memorable, high-converting copy?

The answer, as usual, comes down to: “It depends.”

But not on what you might think.

Let’s Be Clear: Copy That Actually Converts
Doesn’t Come Cheap

Before we go any further, let’s just agree on a few points…

Decent copy takes time & skill.

Consistently high-converting copy takes time, skill, research, and statistical validation. If you’re outsourcing the job, this will cost you money — often quite a bit more than you might expect for what appear to be, you know, just words.

But on the flip side, we all know that effectively optimized copy can have an unbelievable impact on your sales performance.

Heck, the CRO case studies CopyHackers, Unbounce, and ContentVerve have published over the last few years are enough to make a startup owner downright salivate:

“We got a 123.9% lift in clicks on that button, with 100% confidence …”

“This simple exercise in clarifying value and relevance resulted in an 83.75% increase in sign-ups.”

“Let me walk you through the simple changes we made to make the leap from 2% conversions to 27% (a 1250% lift!)”

Man.

Just look at all those sweet, sweet conversion lifts …

So alluring …

So cost-effective …

So statistically significant

 

Homer Simpson, drooling.
Those sweet, sweet, percentage lifts … Rarrghughlgrglurhhhhh …

 

Hey!

 

RuPaul slapping a woman across the face ... hard.

 

Before you get completely seduced by these delicious case studies, repeat after me:

“In the world of CRO, not all percentage points are created equal. “

Depending on your business, a 25% conversion lift could mean an extra $100,000 in profit a year … or an extra 5 bucks.

Like I said, it depends.

This is why it’s absolutely crucial — before you start cold-calling copywriters and negotiating fees — to step back and objectively calculate how much value conversion-optimized copy is likely to generate for your business.

… because the hard numbers you end up with might just surprise you.

Introducing the One Metric to Rule Them All: Your cLTV

The key to accurately estimating how valuable CRO will be for your business is calculating what’s known as your Customer Lifetime Value (cLTV). Once you know your cLTV, budgeting for CRO — or any other marketing project, for that matter — becomes child’s play.

(If you’re a data junkie and feel like drinking in some advanced analytics wizardry, check out Avinash Kaushik’s bad-ass blog post on cLTV here.)

In a nutshell, your cLTV tells you — on average — the total amount of revenue a new customer will generate for your business over the long term. Once you know how much money your average customer is going to bring in, you have a clear ceiling on how much you should spend to acquire new ones (in other words: a limit on how much you can spend to increase paid conversions without going into the red).

If your cLTV is relatively high, then investing in professional CRO usually makes sense.

If your cLTV is low, then outsourced CRO is probably the last thing you should be thinking about.

Let me illustrate this with a few examples:

Example A: The Business That
Doesn’t Need CRO (Yet)

Let’s say an e-book author came to me looking for help with his landing page copy.

“My copy is terrible!” he writes in a slightly panicked email. “I need copy that converts like crazy and I need it YESTERDAY!”

We hop on Skype and he tells me he’s selling a $10 e-book and generating about 10 sales a month.

Right off the bat — thanks to the power of cLTV — I know that no matter how valuable CRO can be for an online business, a conversion optimization expert is not what this guy needs right now.

How can I tell? It’s easy, once you know what to look for:

Clue #1: He’s selling a one-time product for $10. This means his customers will buy once and won’t come back. So his cLTV comes out to:

$10 per order    x    1 order/customer    =    $10

Each additional paid conversion he acquires from my services will increase his business’s revenue over the long term by … 10 bucks. That ain’t much.

Clue #2: He’s making 10 sales a month. Even if I wrote pants-droppingly good copy for him and increased his sales by 200% — a % lift any CRO expert would blog & tweet about — this would only generate an extra $200 per month for his business:

10 sales      x      200%     x     $10 per order     =     $200 per month

Clue #3: As I mentioned before, high-converting copy takes time & money. Even if I charged just $1500 for his project, it would take this guy nearly 8 months just to break even.

Based on this breakdown, it’s pretty clear that professional CRO should not be at the top of this guy’s priority list. (In fact he’d probably better off brainstorming strategies to increase his cLTV, not his conversions.)

Now let’s look at a business for whom investing in CRO would be a no-brainer, based on its cLTV.

Example B: A Business That’d Be
Stupid NOT to Invest in CRO

Let’s say this time I get a project request from a tech startup. They sell a subscription invoicing service for $20 a month, and have determined that, on average, their customers tend to stick around for about 2 years. They currently get about ~10 paid signups a day.

With just these 3 data points and the magic of cLTV, I can quickly see that this business would score huge long-term wins with some solid CRO:

Clue #1: Their cLTV is relatively high. Their monthly fee might be just $20, but each customer pays the fee an average of 24 times:

$20 per order      x      24-month retention     =     cLTV of $480

Clue #2: They’re acquiring new customers at a rate of 10 signups per day, which comes out to about ~300 signups per month. Even if I help them gain a modest increase in paid conversions — say a 10% lift — my services would generate an additional $14,400 in lifetime revenue for them within the first month alone.

$480      x      300 signups      x     10% lift     =     $14,400

Clue #3: Based on the fact that they stand to generate so much value from CRO, we both know that investing the time & money required to get solid results will be worth it. Even if I charge $5,000 for the project, they’re likely to earn 3 times as much back in paid conversions within a matter of weeks.

Why Lifetime-Value-based Pricing
Just Plain Rocks

Ever since I discovered how effective cLTV calculations can be for budgeting CRO, I’ve gotten in the habit of using it during initial project consultations.

I won’t lie, plenty of new clients are surprised when they ask me for a quote and I reply by asking for a breakdown of their sales stats.

But despite the occasional raised eyebrow, I’ll be sticking with cLTV-based budgets from now on for 3 extremely good reasons (and I’d argue that you should, too):

1. cLTV-based fees are honest and objective.

Personally I’m not a huge fan of the time-consuming song & dance that comes with proposal-based negotiations (well, really, who is?).

cLTV-based projections are fast, transparent and 100% objective. We take a hard look at your data, quickly determine how much business growth could realistically be achieved with a given project, and decide whether it makes financial sense for both parties. No song & dance. No smoke & mirrors. Just a handful of honest numbers and a dash of common sense.

2. cLTV-based pricing filters for data-driven clients.

If I ask a new client what their average order value, retention rate, and profit margin is and they bashfully admit they don’t know, this is a pretty strong indication that their analytics & KPI tracking need work.

Conversely, if the client enthusiastically rattles off these numbers without a second thought, that’s a good indication that we’re on the same page, and we’ll be able to hit the ground running (erm, or testing).

3. cLTV projections reveal the true value of great copy.

I think it’s pretty fair to say that most people don’t really know what’s involved in writing great copy. I’ve read project requests that demand “elegant, short copy like Apple’s” and then offer 300 bucks for a site-wide overhaul. I’ve met business owners who scope their copy needs based on the number of words they need to “fill” the boxes in their wireframes.

cLTV-based pricing reminds clients what CRO copy actually is (i.e. copy that takes whatever form it has to to stoke customer motivations and minimize friction), and makes it clear, in no uncertain terms, what it can achieve for their business.

~momoko

P.S. Want to start calculating accurate budgets for your own CRO projects? Download my CRO Budget Calculator spreadsheet and find out how much CRO is worth to your business (includes version for subscription / SaaS products!)

About the author

momoko

Momoko Price is a CopyHackers-certified CRO copywriter & interaction designer. Got a sales page or funnel that needs fixing? Drop her a line at http://kantan.io

  • Excellent post, Mimoko! thank You for this great article we have so mush think to learn from You

    and also the landing pages exempes if we need Build our email liste is so important

    if you want to see this from here http://soulimane.com/the-best-landing-pages-examples/

  • I’m gonna start pricing my copywriting clients this way. I really see the benefit in making sure that my clients are on the same page as me. If they don’t even know the cLTV then I probably don’t want to work with them. Thanks for the great (very applicable) post!

  • SOLD. I’ve been reworking my packaging for various content marketing services, this really hits home as a differentiating approach. Thank you!!

  • James E. Turner

    Thanks Momoko, for the excellent spreadsheets and article. As Dave said below, thanks to Julien too for a worthy addition to the discussion.

    • Hahahaha, Tot-*te*mo kantan, ne? 😀 Glad you found it helpful!

      (Please do not try to further our conversation in Japanese … I remember about only a handful of words from my childhood stint in Japan at this point. It’s embarrassing.

      I think you’re the first to pick up on the meaning of ‘Kantan’ right away!)

  • Dave

    Yes, Momoko. Great post!

    You’ve done an excellent job of explaining these ideas in simple, clear terms.

    It’s great to identify additional people whose work I’m eager to follow. Copy Hackers seems to be a great watering hole where a lot of smart people gather. I recently discovered Jen Havice here as well.

    Thanks also to Julien for his insights on the importance of considering CAC in addition to cLTV.

    Can’t wait to see your app, Momoko.

  • Robert Sanders

    Thanks Momoko for the post.

    So how would you apply this to a new startup who needs copy to just get started and is an e commerce business selling a physical product on-line?

    I see the LTV importance and the CAC Julien mentioned as needed, to complete some Unit economics business modeling using the assumptions a startup must make to get to those sales stats you mentioned you base your pricing on.

    So how would you approach a client of this nature?

    Thanks,

    Bob

    • Hey Bob,

      To be honest, I don’t know that it would make sense to use this kind of pricing for “de novo” startups precisely because they don’t have the data to make accurate projections yet.

      When negotiating these kinds of projects, I usually clarify right off the bat that when it comes to conversion & engagement, copy has proven time and again to be as or more valuable than page design alone (see articles like this: http://uxmyths.com/post/718187422/myth-you-dont-need-the-content-to-design-a-website)

      … and therefore the client should expect to invest as much into their copywriter as they are already investing in their designer(s).

      If they balk at this kind of reasoning, then I know right away that we’re not going to be a good fit.

      (The last thing I ever want is to be working on a web project where the copy is being dictated by arbitrary box dimensions, rather than real customer needs & research!)

      • Robert Sanders

        Thanks Momoko for the honest advice. Funny, I have budgeted Content to Design 2:1 or content gets double the $$ that design does.

    • Oh also: if they really can’t invest in an FTE copywriter at their current stage of development, then I’d also recommend just trying to get their copy 80% of the way there on their own, and then reaching out to a business like Snap Copy: http://snapcopy.co

      That’s exactly what it’s there for 🙂

  • Excellent post, Mimoko! I love your point about understanding cLTV and how businesses can then take that info and start a paid customer acquisition campaign. Jeff Bezos once told someone in his marketing department that they could do whatever they wanted, so long as they acquired customers for less than $33.

    I have to share another resource on the topic of lifetime value and customer acquisition. Juan Martitegui’s interview on Mixergy is one of the best explanations of direct marketing and conversion rates I’ve ever seen. Here’s the link: http://mixergy.com/interviews/mindvalley-library-juan-martitegui/

    • Doh, sorry for misspelling your name, Momoko.

      • Lol, not at all! Happens all the time 🙂

        I love that anecdote about Jeff Bezos! My other favourite quote of his is:

        “Your ‘brand’ is whatever people say about you when you leave the room.”

        So true.

  • Phenomenal post! This is super helpful not only for clients but for other copywriters who are trying to convey their value. Definitely bookmarked and off to share.

    • Yay, thanks Jen! I’ve already started coding up the app version of the spreadsheet for our website 🙂 Hopefully that will make it even easier to share and circulate with copywriters and clients alike!

    • Hi Jen, just a word of caution when using LTV to convey value: I don’t know if you’ve seen my comment on the importance to consider the client’s Customer Acquisition Cost as well as LTV.

      Conveying value delivered with LTV is fine, but trying to justify fees with LTV only without considering CAC is often seen as disingenuous, because clients should not pay more than their current CAC , regardless of LTV.

      So one needs to be careful when talking to clients about fees using LTV without making it clear their own interest is better served by talking about CAC 😉 Easy way to lose the trust of prospects/clients!

  • Hi Momoko: great post and as a fellow CRO consultant, my practice is also always to build a business case for CRO with every new prospect.

    I base my fees on the performance actually realized as measured by a set of tests, and I set my fee level as a fraction of the additional profit I generate for them. So it’s critical for both me and my clients to agree on exatly what their business metrics are so we can agree on a set of numbers that will determine my fees going forward. As you explained, this is both fair for both sides and cust down drastically on the pre-sales time.

    But while I agree with your points regarding the LTV, I’d suggest to also incorporate its usual counterpart, the Customer Acquisition Cost (CAC), in the picture and the business model. Because even if your prospect’s LTV is very high, that doesn’t mean your prospect will systematically benefit from a CRO effort. It entirely depends on its CAC.

    Briefly, the CAC is the total cost spent to acquire a new customer. It should comprise everything spent on that front: ads, pre-sales, sales team time, collateral, etc. For more details, a classic post on LTV/CAC/etc., especially for SAAS companies, is this one from David Skok: http://www.forentrepreneurs.com/saas-metrics-2-definitions/

    Improving the Conversion Rate of a website is essentially a way to acquire more customers. The only difference is that spending on CRO is really an investment that will deliver additional customers every month after an improvement to the website has been made, by contrast to, say, CPC, where you have to pay an amount to attract each customer.

    So to really see if a prospect would benefit from CRO, LTV is not enough, you have to consider its CAC. If it’s low enough, they may be better off just increasing their spending on their current channels. The time for CRO will ultimately come of course, because increasing your spending on your current channels leads to diminshing returns and an increase in your average CAC.

    To illustrate with your example B: your 10% lift means you’re generating 30 additional clients each month for them through CRO, which leads to a total LTV of $14,400. But if their CAC is $1 (extreme example, but just to illustrate), then they could generate 30 additional new customers each month for just a bit more than $30 (diminishing returns), let’s say $35. So for them, if they evaluate CRO over just 1 month, it wouldbn’t be rational to pay more than $35 for it, even with a generated LTV added of $14,400.

    If they accept to evaluate your CRO gains over 1 year, which is rational but not always easy to negotiate with clients, you generate $14,400 x 12 = $172,800 of additional LTV for them over 1 year. Which seems like a steal if you price your project at $5,000. But then, they could generate that much LTV for $35 x 12 = $420, so that’s the upper margin you have to work with in terms of CRO pricing.

    So LTV alone doesn’t give you nor your clients the full picture, you must couple it with CAC. The good news for us in the CRO field is that of course, the more clients will spend on their current channels, the more their average CAC will increase and the more affordable a CRO project will look like.

    So over time, every SAAS / Ecommerce company will benefit from a CRO effort, but the exact timing will be determined by the evolution of its CAC 🙂

    • Hey Julien:

      “To illustrate with your example B: your 10% lift means you’re generating 30 additional clients each month for them through CRO, which leads to a total LTV of $14,400. But if their CAC is $1 (extreme example, but just to illustrate), then they could generate 30 additional new customers each month for just a bit more than $30 (diminishing returns), let’s say $35. So for them, if they evaluate CRO over just 1 month, it wouldbn’t be rational to pay more than $35 for it, even with a generated LTV added of $14,400.”

      YES. Thanks for upping the analysis even further, because it is so true that strategy projections aren’t just about calculating the absolute value of a plan, but the relative value/return compared to other alternatives.

      I’m actually working on creating a user-friendly web-app version of my calculator spreadsheets above, and will definitely include CAC, and if I can manage it, churn rate, too, for the saas version.

      Another factor that makes a huge difference (I included it in the spreadsheets but not in the examples, which were more intro-to-general-concept examples), is of course your net profit margin on each order sold. Seems obvious, but it’s funny how often this can be neglected in the chase for short-term gains.

      I had a situation last year in which a client and I did some calculations on doing some CRO work on a side project SaaS app of his, and we quickly realized after punching in some numbers that it really wasn’t going to matter how much work we put into CRO — his cost of goods sold was so high that it was going to obliterate any improvements we could achieve at this early stage of the game, so we shelved it and he decided to focus on optimizing *that* first.

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