In my previous post I talked about how offline media works and how to structure a test for a SaaS or e-Commerce business.  In this post I will talk about how to gauge whether or not these channels offer an effective customer acquisition strategy at a cost that makes sense based on your customer lifetime value (LTV).

Categories of Offline Media

For this post I will cover the following offline media channels.  

The table shows the high level economics for each channel based on assumed conversion rates and CPMs.  The table also shows which channels are scalable to break through.  This is critical for an offline media channel, and it is a reason why Remnant spot purchases (the purchase of unused ad inventory at the last minute) is difficult to make work even though the economics are attractive.  You just can’t buy enough spots on a consistent basis in the same geographies to break through and generate results.  I’ve included more detail on each channel below.

Local/Network Radio - This category covers purchases of radio spots on local stations in a specified geography.  The CPMs make this channel a challenge for many SaaS and eCommerce companies because of the high LTV required to make the economics work.  However, this channel is very scalable and easily set up for geographic testing. This can prove that radio is a viable channel and set you up to use national networks which have much more attractive economics.

Sirius Radio - Sirius or satellite radio has favorable economics on a CPM basis and can prove to be a viable channel for a wide array of SaaS and e-Commerce companies.  However, it can be a challenge to test because you can not target it geographically. You have to rely on time-series tests (comparing the traffic and sales during the test period to those values before the test started).  It is also not an audited channel, so you are never 100% sure how many impressions you are getting.

National Network Radio - National network radio has favorable economics and a very large reach.  This channel can be great for customer acquisition for a SaaS or e-Commerce business.  That said, it requires a very large investment - on the order of $500K-$600K per week to run national radio at scale.  For this reason it is often best to test network radio locally in a few markets and measure the traffic, CPA and sales.  If those show a result, you can be fairly sure that rolling out a national campaign on national networks will generate the same result with a CPA that is 3X-4X lower than you will see in regional/local radio.  This can make you more confident in making the large investment in national radio given the need to purchase 6-9 weeks ($3M - $5.5M) to really see the impact.  

Pandora/Spotify - Streaming providers provide a channel opportunity that has costs on the order of regional radio ($15 CPM) and can be geographically targeted to allow for good tests.  However, unlike network radio, there is no CPM benefit in switching from regional to national so you need to be selling a product with a high LTV to make this channel work.

TV/OTT/Cable - TV can be an interesting channel to test but has higher costs than radio in terms of CPM and in terms of creative.  A solid TV creative can cost $150K - $250K.  TV CPMs are also higher than radio but some products and businesses see higher response rates from a visual medium.  If your LTV can support this channel it can be tested geographically so that you can be fairly certain of its effect.

Podcasts - Podcasts are generally not a very good direct response channel.  They can provide awareness and branding benefits, but given the high CPMs and the difficulty in scaling this channel it is not generally viable for most SaaS or e-Commerce businesses.

Remnant Radio/TV - Remnant purchases can provide attractive economics for both radio and TV, but it is difficult to scale these purchases in any geography to ensure that you can break through and see a result.  If it is possible to limit these purchases to small geographic targets that can be run over an extended time, this channel may be useful for testing the viability of radio and/or TV

Conclusion

Offline channels can provide an excellent customer acquisition strategy for SaaS and e-commerce businesses.   But, before going down this path, make sure that the channels you are testing can be effective based on your LTV and the economics of the specific channel.  You can save yourself a significant amount of money and time by screening out channels that will not work based on your LTV and acquisition metrics.

Mike Morris is the founder of Kettle Hole Partners. When he is not trying to figure out mathematical models for marketing and customer acquisition he is probably riding his bike.