Marketing Waste: Cost per Conversion

December 7, 2007 by

This is part 3 of a 4 part series on using your marketing budget effectively. You can read the original post to get a better understanding of Tim’s money-saving advice.

We’ve begun to looking at ways to stop wasting money on marketing. Step one taught us to “Establish a measurable indicator for every marketing effort.”

Step 2: Run a small marketing effort to determine your cost per conversion.

Before you launch into a full-blown campaign, test run your effort to see if it is effective. With your indicator, or goal, clearly established and your tracking measures in place (see step one), you can now determine your cost per conversion.

A conversion, in the marketing sense, is not someone coming to faith in Christ. Rather, it is simply one completion of your goal (remember step one when I told you this wouldn’t seem very spiritual?). Your cost per conversion is the amount of money you spend divided by the number of conversions you achieve.

Let’s look at an example. Suppose you send out a direct mail postcard and on the postcard, you ask people to visit a special page on your web site where they will fill out an online form. Your “goal” is getting people to fill out the form. You spend $500 to run a small test campaign and you track the number of form submissions you receive. Let’s say 40 people fill out the online form. In this example, your cost per conversion would be $500 divided by 40, or $12.50/conversion.

How about another example? Let’s say that you place an online banner ad on a web site that targets your audience. Clicking the ad directs people to your web site. Let’s say that your goal is still to have the person fill out an online form. Using an analytics program, you can track how many people complete your online form after having clicked on your ad. You spend $100 to run your ad for one month and 2 people fill out your form. Your cost per conversion would be $100 divided by 2 or $50/conversion.

Armed with this information, you can now make a few important observations.

  1. First, you can tell that the postcard generated a better (cheaper) cost per conversion than the online ad, even though the total cost of the direct mail was more. Cost per conversion is to marketing what price per pound is to meat. It helps you determine value instead of just looking at price.
  2. Second, you can now evaluate your cost per conversion to determine if your marketing effort is worth the money or if it is a waste. What is a good cost per conversion? Only you can answer that question. Is it worth it to your church to spend $12.50 to get one person to fill out an online form? Some might say “yes” and some might say “no”. It all depends on your context. The important thing is that cost per conversion gives you the ability to make that determination. If you are only evaluating total cost, you are most likely wasting money. By looking at cost per conversion, you can determine if your efforts are effective or wasteful.
  3. Third, over time, your cost per conversion gives you a frame of reference by which you can determine if a particular marketing effort is fairly priced. For example, if you run a lot of online ads, you will start to establish a “comfort zone” of cost per conversion. When you run a test campaign on a new site, you can quickly determine if that site’s performance is in your comfort zone. Not only does this help you select the best ad values around, but it can also give you grounds to negotiate better ad rates with providers based on real conversion data.
Post By:

Tim Wall

Tim Wall used to be a full-time pastor of technology, communications and what not. Now he leads worship at his church, he blogs (sometimes), and he also works for Element Fusion, a company that builds web-based software products like Sky and Light.
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14 Responses to “Marketing Waste: Cost per Conversion”

  • Jake W.
    December 7, 2007

    This post is alarming. “Cost per conversion”…I can hardly believe that you’re suggesting that churches begin measuring how much $ it costs to “get someone saved”. I don’t think this is a very healthy thing to measure.
    Recently I attended a conference on word of mouth marketing. The entire conference was geared toward equipping companies to encourage its customers to talk about the product and recommend the service to a friend. Every case study that was given talked about being remarkable in terms of the product or service and the experience provided to the customer.
    Instead of “measuring how much it costs to convert someone”, churches should be focused on being remarkable – which in this situation means outrageously loving people at cost to onself. IF people who attend church, both staff memebers and lay people, began loving people, replicating calvary, our churches would be filled without having to spend one penny on “marketing”.
    It’s not about conversion rates and proper marketing spends, it’s about LOVE! LOVE WINS! People are dying to be loved and we’ve seriously missed the mark if we’ve digressed into talking about how much money it costs to save a soul.
    How much did Jesus spend on his direct mail campaign? He was the originator of word of mouth marketing! He loved people so outrageously that people had to come and find him and word spread like wildfire.
    Perhaps we should skip this post and look to a better example of how to “convert people”.

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  • Tim Wall
    December 7, 2007

    Jake, I appreciate your comments, but I just want to point out one thing you seem to have misunderstood. Here is a quote from the post above:
    “A conversion, in the marketing sense, is not someone coming to faith in Christ. Rather, it is simply one completion of your goal.”
    Cost per conversion is not talking about a person coming to Christ. Perhaps this will help you to better understand the intent of the article.
    Sorry for the confusion.

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  • Joe Suh
    December 7, 2007

    Brave post, Tim :) I touched on the same topic a week ago (click my name to go to that blog post)
    An effective advertiser must analyze things like CPC and ROI (as you pointed out). But talking about them within a church setting will certainly raise eyebrows and get some knee-jerk reactions. Especially since the word “conversion” has deep emotional connotations (who in church doesn’t have a “conversion” story?).
    Regardless, great points. It’s not very spiritual as you said. But its not a taboo topic either.

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  • Todd Staffford
    December 8, 2007

    I can see where people would get uptight over your article, but I think they are missing the point. You wouldn’t want everything you do to motivated by “cost per conversion” but you do need to be aware of what you are getting in return on investment. Even more so when you consider that the money being spent is money that people have “given to the Lord.”
    We do a huge children’s event each year at Halloween, involving over 100 workers, two weeks worth of set up and about $10,000. It would be attended by over a 1000 people, so we assumed it was a raging success… Until we realized in 4 years of doing it, not one family had started attending church because of it. We still do it, be we no longer view it as a tool for bringing new families into the church.

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  • Ray
    December 9, 2007

    Good post. Marketing does have its place under stewardship. While numbers can be a bother, Jesus did talk about “fruit” and “harvest yields”. This is a good way to gage those things.

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  • Jim McGee
    December 13, 2007

    Speaking of “cost of conversion” in the spiritual sense (for anyone not thoroughly appalled by the idea), mission researchers David Barrett and Todd Johnson have compiled estimates of “Cost-effectiveness” (baptisms per $ spent in evangelistic activity) and “Responsiveness” (baptisms per time spent in evangelistic activity) for every country and people group (See Here in the U.S., they estimate we spend more than $1.5 million per baptism, but that doesn’t even make the Top 10 least-cost-effective countries. Sobering.

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  • Gene Mason
    December 13, 2007

    Whenever I think of efficiency measurements in the church (ROI, cost per conversion, etc.), I think about the Good Shepherd, who left the 99 sheep to care for the one, or Phillip, who left a successful “revival” in the NT at God’s direction to go into the middle of nowhere and meet an Ethiopian. Neither was efficient by our standards in use of time and resources.
    In measuring our effectiveness, is it not interesting we think first about what it costs us to “get each person in” (to the church, the family of faith, whatever) versus how much we are sending out into the world? Would the most efficient and effective church, by the standards we see in the New Testament, not be the one that “gave it all away” versus “managed it well in order to receive a good return?”
    Cost-effectiveness conversations in the church always seem to come back to what we’re spending on ourselves to reach ourselves. Where’s the push beyond our campuses to impact the world? We’re just simply having the wrong conversation.

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  • Jason Lobmeyer
    December 15, 2007

    I really like this post. Kudos to Gene for bringing up the uncomfortable subject of “where’s God?” Are we really so intelligent that we’ve become able to quantify and determine the best way to bring people to Christ that there is no place for prayer or the leading of the Spirit?
    The marketing guys who dig this blog must hate those not in marketing. Of course they pray and love others and follow the guiding of the holy Spirit in their decisions. They probably don’t need fellow christians to second guess their motives.
    I’m not in marketing. I do often wonder what the great deal of commotion over marketing the church is. Aren’t we called to Go, not to Bring? This seems counter to the great commission and the example set by Jesus. During the Christmas holiday does it not register that he invaded our world and came to us?
    Perhaps our business minds from our capitalist society have no place in our faith. It doesn’t appear that God is getting quite the right ROI from his death and resurrection. But that’s why He’s God, right? Mercy, love, forgiveness, sacrifice; that sounds like Him.

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  • Sam Andress
    December 16, 2007

    I hope I am misunderstanding your use of “cost per conversion.” Either way that seems to be a very nauseating way to speak about how the church should think about advancing its mission of being faithful–which cannot be measured in economic terms…

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  • Tim Wall
    December 19, 2007

    Yes, Sam, perhaps you are misunderstanding the term “cost per conversion.” See comment number two (above) where I addressed this.

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  • Anthony Peterson
    April 4, 2008

    Cost per conversion? Why not measure cost per conversion. Billy Graham does – at least he reports of the expenditure of each crusade and the number of inquirers. Divide the former by the later and you have your cost per conversion. Was that hard? No. Was that blasphemous? No I dont think so. Its HOW we interpret this data that will lead to intelligent discussion and some times heated debate. The simple fact is churches have limited resources and the primary goal of the church is evangelism. Surely the parable of the talents teaches us that Jesus will hold us repsonsible for how efectively we used our resources. Call me old “crazy”, call me “old fashioned” or maybe Im just fed up with Churches wasting money. With no defined and measureable goals then theres no accountability. It what I call the Homer Simpson attitude to evangelism “If at first you dont succeed then pretend you never tried”.
    Ps the “cost per life saved” issue is the subject of much more debate in the secular world. Check out my website if you are interested.

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  • Anthony Peterson
    April 4, 2008

    PS. Just to remind all our super spiritual friends out there, if we actually looked at cost per converstions and then did something about it we would stop investing millions of dollars in wasteful things (e.g. Christian television?) and invest them in ver cost effective missions work. This would translate into more people saved and won into the kingdom of Heaven. Think about that at your next prayer meeting.
    And – if you dont think the church needs money to actually reach people then try telling that to your pastor. In fact, why not experiment by getting your whole congregation to stop tithing for a year? Your church would be dead in about 6 weeks.

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  • Nate White
    July 11, 2009

    As a marketing guy who’s not exactly a believer, I don’t find the use of “conversion” offensive at all. As for a business side of things you MUST track figures such as cost per conversion so you can go back to your church members and say “Look what we’ve done!”
    I actually had a client a few months back who sold Sunday school supplies online and talking to him about cost per conversion always gave me a little chuckle. :o)

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  • Sean Cannell
    September 5, 2010

    I think “ROI” should be a major discussion in every areas of church and ministry and I’m thankful for this series to stir that pot! I think often times churches and leaders lob out spending, time, and energy on the wrong things. Thanks for the insights!

    At almost every major intersection we should ask… what is the Return on investment for what we are about to do!

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