Art Coster talks about Facebook ads, lifetime value of a customer, and customer acquisition

Peter Keller: Hey guys, this is Peter Keller from Fringe Sport and I'm on with Art Coster.

So, Art initially came to my attention because I'm in a bunch of marketing Facebook groups and I saw a really interesting post that he had made about some customer acquisition via Facebook ads for a gym, so I started messaging him on Facebook, gave him a quick call and I was really interested in some of the conversation that we had, so I thought it would be really useful to talk a bit about Facebook ads, a little bit about lifetime value of a customer, customer acquisition - a few things like that.

So Art, what did I miss in that intro? Tell us a little bit about yourself.

Art Coster: Well, I'm really appreciative and honored that you would even call me up and invite me into your crowd and your audience. I'll give you the short end of the story and try to keep it as short as possible. I've been online for about 12 years making a living. The last seven have been local marketing for local business owners to help them out - digital marketing. We originally started out as a full boutique offering everything - SEO, etc, which everyone knows about - but in the last two years, we've really focused and honed in on a couple things, and that's one: instant on a line for customers and also branding them to be a notch or two above everyone else in variations of branding. 

Now, what we really did, we moved away from the slower moving SEO and we pulled Facebook, which if anyone knows now ... Most people think of Facebook as just posting on their page and unfortunately there's only 3% of business out there that actually move towards the Facebook paid ads, which is a benefit to anyone now. Right now, the reason why we did this is it's now the most effective - cost effective, powerful and targeted platform out there, and its the most respected that's ever been out there, to this date.

Peter Keller: Let me dig into that a little bit. Why Facebook and why now? So I used to manage pay-per-click campaigns through overture way, way back in the day, through Google AdWords after that, and of course for my business at Fringe, we've done a little bit of Facebook advertising. But what is it about Facebook advertising that makes it the platform of the moment?

Art Coster: It's kind of the wild wild west golden ages, the blue ocean moment. Right now, there's only - and this is per Facebook in August, 2016 - there's only 3% of companies actually advertising on Facebook. Yes, they use Facebook pages and everything but they're not using Facebook paid ads, and I do not account - and I don't think they account - for Facebook posts as being paid ads. Even though you pay for it, they're not actively using the marketing. Because of this, you basically have the entire share to find - no one else is doing it. This is where your audience is. Your audience is on Facebook, so anyone on Facebook is going to be there and now this is the number I don't have, but there's billions - basically everyone is on Facebook everyday. So anything you get through there is going to be - well again, like I said, there's no one else doing it so you have the entire pie for doing it.

Peter Keller: I love it. And one thing to mention here - so a lot of our audience is going to be basically owners of micro-gyms, affiliates, that sort of thing. So, the key things that you're saying here kind of remind me of my marketing path - which, you know I'm still an internet marketer - where a lot of times, the platform will come out and very few people will know how to use it effectively and that's what you had said, like the blue ocean times or like the golden times. So for example, when I was initially managing pay-per-click ad campaigns in the early 2000s, it was crazy how cheap you could get traffic for. So is that what you're saying about Facebook ads right now, is that that's the time?

Art Coster: Yeah. Basically, most people don't realize how sophisticated Facebook has gotten. Yes, one, it's going to be one of the cheapest aspects that you can do to drive traffic right now, and Google is great for certain things you still need - you can't deny Google. They're equal. But if, and, or, there's surge marketing and there's interruption marketing. Facebook is a form of interruption marketing where they know they want to do something and when they see you on there and you speak to them, you are actually becoming - or they become a much easier sale because they're getting to know they can trust you right off the bat.

So yes, right now, it's probably the cheapest it's ever going to be to go ahead and get on, for you can actually collect and create a list of people that fit your exact ideal client profile. You get on there, you can actually go and take what is your current customers, dial them into Facebook, Facebook will read them, find other people like them, digest it, and then feed them back to you into your list, so that you can procure your ad out there and because it's not like a billboard, not like TV - you know, the golden age of TV where there's three channels, so everyone had to see you, as opposed to DVR now. Now you're speaking to exactly who you want to: demographic, age, likes, friends of likes, so that you don't spend money on talking to - in the terms of a gym - you're not speaking to grandma whose not going to come in, you're not speaking to a toddler, you're not speaking to someone that lives too far away. You've got three miles, eight mile radius, demographic, income and likes that you can target.

So, you're going to get 10,000 views. You can do 10,000 views to that client type that you want to bring in. So not only are you getting the cheaper amount and the views from exactly who you want, you're doing it to an audience that will buy from you, and they can reach out to you and give you their contact information so that once you're on a list, you can do so many other things. You can sell to them your gear, if you have - if you're doing that right now. You can do affiliate marketing where you advertise stuff that you want to sell or to - like, on Amazon - an they can profit from it. They don't even have to be your client to make money. So there's a lot to do with it right now.

Peter Keller: Wow. Yeah, it's definitely a lot opportunity out there. Now, in terms of narrowing this down a little bit to attracting leads or attracting someone for a gym, what does that look like? What would a typical campaign look like? How should our customers be going about constructing these?

Art Coster: In terms of creating a sales funnel online or in terms of how to do things right? Fill me in a little more on your question.

Peter Keller: Yeah, well both of those. So first of all, you said sales funnel. What is a sales funnel, for someone who doesn't know what that is?

Art Coster: Okay. A sales funnel is going to be several different parts and pieces put together. You're going to have to start with, in terms of paid ads, you're going to have to create an ad. Now when you do your ad you have to pick out a good graphic that will work and speak to your audience. You need to talk to your audience in a specific way. On Facebook, you need to pick because you're not allowed to use faces when you're doing health and fitness and gym, so you can't use before and after pictures. You have to speak to them in a certain way that says, this is what you want to do. Right now, there are several different ways. You can do images, videos, carousel ads. But again, it starts with the ad.

Then the next thing would be to do is to send it to what is called a landing page. A landing page - a squeeze page - is where you give them information and it's where you advertise a little bit more about yourself. If you've got anything going on, you would like to have a nice video about your place, and you want it to be not super professional, because people actually respond more to something that is real. We're so ad blind to commercials, that when we see something that actually says local, where we're from, and you can see that it's a real person, a business owner, you respond to that more. So when we see that it is something we would like, and that is the encouragement or enticement to give our information because you want to - on your landing page, you want to do something that entices them to come by, or gives them information. You need to give them a great amount of value right then and there because you're getting something of value in return, and that's their personal information to let you contact them anytime you want.
Now, from there, once you have their information, that allows you to email them, call them, put them in our auto responder, where you no longer have to worry about doing it. You set up a set number of emails or a soap opera sequence that speaks to them, send them more testimonials, and this is where you can get into your before and after and everything you've done, talk about your passions and really connect with them. But at the same time, in the very beginning, if you give them a good offer, you can get them to call you right then and there and book an appointment to speak with you. Once they're in your place, that's when you actually start doing your sales. So you're doing this as lead generation to get to your sales process, and that's when you talk to them.

Peter Keller: I loved that. When you talk about getting into your sales process so you can actually talk to them, do you mean physically getting them in the door to a gym, do you mean getting them on the phone, what does that look like?

Art Coster: Well there's going to be variations on how far you get them through a marketing funnel because a marketing funnel and a sale funnel are two different things. In terms of my job and your job or the gym owner's job or any business owner's job, I get them to contact you or give you the information to contact them. There comes a clear line where you have to have a sales process in place to do what you do, and that's make them a customer. So, we have multiple variations on that. One is we try as hard as we can to get them to contact you because that's the warmest lead ever. They call up and say, hand up, I like what you're offering, can I try it, can I come by? But that doesn't always work. There are people who are on the phone, they're at work, they're surfing at work and shouldn't be doing what they're doing, so that might not happen, but now you have their telephone number and you have their email and you have the opportunity because you said in the process of the ad - text them and say, hey we're going to contact you in 10 minutes. When they first contact you, that is going to be the hottest moment ever to get them in your door.

Peter Keller: So, Art, that all sounds great. One of the really interesting things that you and I were talking about earlier was how to think about the lifetime value, or from a marketing perspective, LTD; lifetime value of a customer. So for a gym, how do you think about lifetime value of a customer?

Art Coster: Yeah you bring up a point the multiple business owners have a hard time digesting and sometimes they get starry-eyed or something if someone offers them a raise, a spot, or a TV commercial, or a billboard, and ya know they have a hard time realizing what they can do. But with ads you can go ahead and track everything. What most business owners don't understand or have a hard time, and I understand that from their perspective as well, is they spend money and they want to see money back instantly. In terms of a gym, especially in crossfit where you're talking anywhere from 120 to 200 dollars for a membership per month, so in terms of ad spend if they spend 1,000 or 2,000 dollars and maybe they lose, well they don't lose, but they gain, lets see the customer is 150 bucks or wanting you to... tell me are you 100 bucks for even numbers, or what, 200 bucks?

Peter Keller: Lets just use 100 bucks for even numbers.

Art Coster: Even number. Okay, so we'll put that in as if they spent, well my front value, how long is that customer going to be with you, right? So let's go with that. Customer generally will [inaudible 00:02:29] gym, especially cross, it's a very loyal following. I hear two year, 18 months. That's what I typically hear when I'm speaking with a crossfit owner. Speaking with typical gyms, they say it's more of ten months so you know just going the lowest end numbers and make everything simple to follow math wise we'll use 100 dollar membership fee in ten months, that means a customer is worth 1,000 dollars when they walk in the door and sign up. Make sense?

Peter Keller: Yeah absolutely, so it would be 100 dollars for the first month but over the anticipated lifetime of what that customer is going to pay a gym it's going to be one month times ten or lifetime; so 100 times ten, a thousand dollars.

Art Coster: Correct. So if you spent 100 dollars to bring in one client, but he's worth ten times that, that means you're making ten dollars for every one dollar you spend. We both know that in the gym atmosphere with classes and challenges, gym owners have a set overhead that doesn't really change. Whether nobody comes or everybody comes, there's a set overhead. Filling the classes is what's going to make them the most profit. It's not like the service industry where you've got to go and serve more people at once, and it takes more time and effort, the coach has to be there. Correct?

Peter Keller: Yeah, so fundamentally what you're saying is; let's say you can put 15 people in a class, so whether you have one person or 15 people in a class the fixed costs for the gym are essentially the same. Now if you go to 16 people and have to add an additional class then you have to change a little bit. Let's say 1-15 people or whatever it's essentially the same fixed cost.

Art Coster: Well right I'm saying if you have your gym open, you have one person that's your client or your member, you have to show up. Now that you can max out your class at 15, 20, 30, it's the same cost to you but everything above that is monetary and profit too.

So in terms of lifetime value you have to think about all of that; it's not just the cost to get in, it's how much after that becomes a snowball effect of each month after that. So if you spent 100 dollars to collect that client first month and they gave you 100 dollars right back for the rest of that month you do not make a profit, it's breaking even.

However you are doing two things: one you have a member that is just going to be shared profit month after month after month. If you do the same advertising this month you gain ten clients, you gain ten clients next month, that means you have twenty new clients the next month. The first ten are all profit. You break even on your advertising to bring in a new client or member.

Next month again that person doesn't profit, the next month you have 30 people and the next month you have 40 people, but you're spending the same amount. You are snowballing your profit level. While your retention levels should be the same should be as well, but that is where you're generating a lifetime value, and generating increased profits.

Now you have a full gym, now you're getting people who are actually waiting to be in your gym. You can actually raise your prices because you are now a sought after entity in a local market, because all the advertising that's happening is creating a large amount of branding for you as well.

Peter Keller: I love it. One of the things I wanted to drill into on this is from marketing perspective we think of what's customer acquisition cost or CAC. Essentially what you're advocating is that when you're as a business deciding what you're comfortable with, like you're a gym, you're deciding what you're comfortable with to spend to acquire one customer. If that customer is gonna pay you 100 dollars a month you should be comfortable potentially spending more than 100 dollars to get that new customer in and make them loyal because while they'll only be giving you 100 dollars the first month, they will actually be giving you that same 100 dollars month after month for ten or possibly even 20 or whatever months as is the lifetime. Is that what you're advocating?

Art Coster: Correct, correct. Some in history have even and they will spend money, actually in most businesses outside of local, they will spend money to get someone in. McDonalds, and this is back in the day now that they don't charge a dollar anymore, but I think it was a dollar twenty five is what the cost of a double cheeseburger was. They would sell them for a dollar because they know once you get there, and this goes above and beyond the lifetime client value of a core membership, there are other things that you can add on.

You can add on nutrition plans, you can add on personal training, you can add on challenges, once they're a customer they become much easier to sell to and that's all the backend; the backend is exponentially more profitable than even the front end. Yes, the customer acquisition cost you need to think of it as: if you lost money and got them in in the first month, you are still making money by year end, way before year end. By the second month your profiting off that person coming in.

If you're breaking even or making money right up front you are winning. You are extremely winning because you have just created a profit flow for yourself and a list that you can actually use as an ATM to go ahead and market to anytime you want. Even talk with other similar companies that you think people would like and do what is called joint ventures and cross-market so that you can actually split profit in terms of that. Once you have a list you have so many different things you can do to make money beyond just having them as a member. From the core essential of a gym owner or a local business owner you're breaking even on your advertising and its tracked, you are going to be well ahead in the long term.

Peter Keller: Art I love it. Unfortunately we're a little bit tight for time right now, you've given a ton of really great information here and it's going to take even me a little while to digest it; but if somebody owns a gym, they like what you've been saying and they want to talk with you about working with you and you potentially running some of this for them what's the best way for them to contact you?

Art Coster: You can go ahead and reach me at (614) 321-5055. Probably one of the easiest ways is if you're actually on Facebook is just to look up Arthur Koster.

Peter Keller: Cool!

Art Coster:  I do have an older website that's from my time of doing an agency it's called AJKmedia.com, and what I'm gonna do as well is I'm going to put together a list of free tools that your subscribers can go to so they can do this themselves and create a little cheat sheet for them as well.

Peter Keller: Man that would be fantastic. Well Art it's been a pleasure, is there anything else you'd like to mention to our audience?

Art Coster: No that's it except for I really appreciate you inviting me to speak with you, you've been a phenomenal host and you've walked me through your worst interview ever.

Peter Keller: Hardly, hardly. Thanks a lot Art.