Globally companies require access to a limited pool of consumers who, in turn, buy their products and services. Although the Internet is increasingly the best place for many companies to find leads (I.E. the people who have an interest in what a company offers) and acquire new customers, the competition among businesses for new customers is fierce.
Harbor City Capital has created a powerful new way to satisfy this virtually unlimited need for leads and new customers called Digital Marketing Arbitrage.
The Solution: HCC Digital Marketing Arbitrage
Digital Marketing Arbitrage is the process of capitalizing on the difference between the costs that HCC incurs generating online leads for businesses and the income they can generate by selling those leads to businesses. The difference between the sale price per lead and the cost of generating that lead is known as the gross profit margin. Digital Marketing Arbitrage can generate profit margins significantly higher than other traditional investment models.
How It Works
Most businesses have some knowledge of the lifetime value of each of their customers, I.E., the average total revenue each customer brings to the company over the lifetime of their relationship with the company.
For example, the average online university student might be worth $25,000 to an online university over the time that student remains enrolled in studies. If it takes five leads to generate one new student and the university is willing to pay $500 per lead, then they get a new student for $2,500. If the university spends $2,500 per new student, and each student is valued at $25,000, then the university’s return on investment (ROI) is 900%. The university is happy and they can now focus on making the lifetime value of each student higher, for example, by encouraging them to enrol in new studies after graduation.
The benefit to HCC is tremendous. If HCC can generate that $500 lead at a cost of $200 then HCC’s ROI is 150%.
This same principle applies to just about any kind of business seeking new leads, and is a phenomenal win-win situation: The customer will want to keep buying leads from HCC and might even be willing to pay more than $500 per lead, particularly if they can increase their Client Lifetime Value, which would lead to increased ROI.
Moreover, once HCC establishes a relationship generating leads for a company, it then begins the process of lowering its cost-per-acquisition of the leads it generates. If HCC can reduce costs to $150 per lead, and they raise the price of a lead to $600, then its ROI increases from $150% to 300%.
How Leads Are Generated
Through it’s Responzive.com division, HCC’s advertising experts design ads that attract appropriate potential clients for a specific offer. That advertisement is then deployed on a trial basis, to ensure the ad performs as well as projected.
As each potential lead interacts with the advertisement, they are “cookied” and their IP address goes into a database. That potential lead can then be “retargeted” (IE re-shown the advertisement or similar advertisements), until potential leads take an action—such as filling out a form with their contact information—at which point the potential lead becomes a “lead”.
Those who do not take an action remain in the database and may be retargeted from time to time, until such a time as they do show interest in a product or service by taking an action.
With the advent of advanced retargeting algorithms, the cost of acquiring leads has declined significantly, which has in turn lead to greater ROI for HCC. Additionally, HCC has become expert at creating the “Capture Pages” where individuals fill out an online form that contain fields of information such as “name”, “e-mail address”, “age” and so on. This has led to greatly improved responses, more data from leads, and therefore greater ROI to HCC.
About Harbor City Capital
Harbor City Capital Management was founded by JP Maroney, an American entrepreneur, investor, and philanthropist with more than 25 years of experience starting, building, buying, and selling companies in publishing, media, advertising, software, ecommerce, textiles, training, real estate, and consulting.