U.S. crude oil ends 1.2% lower Friday and logs steepest weekly skid since October

Crude-oil futures finished sharply lower Friday, with the commodity staging a turnaround from earlier gains after a better-than-expected report on U.S. employment helped to deliver a fillip to the U.S. dollar, weighing on assets priced in the currency. West Texas Intermediate crude for September delivery closed down 81 cents, or 1.2%, to settle at $68.28 a barrel, with a weekly slide of 7.7%, based on the most-active contract at last week’s settlement. The weekly decline marked the sharpest for the contract since the week ended Oct. 30, FactSet data show. The dollar was climbing 0.6% on the day and 0.7% on the week, as gauged by the ICE U.S. Dollar Index .

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Sturm Ruger's stock turns lower, falls 1.0% after rallying as much as 2.3% earlier

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How to Lower PPC Churn Rates

It’s a pay-to-play world. From social media to Google Ads, companies invest thousands of dollars a month into paid ads. However, there’s a lurking metric you might not be tracking: your PPC churn rate.

When it comes to paid ads, most marketers and business owners track metrics like click-through rate (CTR), quality score, and cost per click (CPC). While those are important metrics, they tell only part of the story.

If your PPC conversion rates are high, but your overall revenue isn’t, the issue might not be your ad. It might be that your customers aren’t sticking around.

What is the elusive PPC churn rate, and, more importantly, why should you care?

What Is PPC Churn Rate?

Your PPC churn rate is the number of people who convert via paid ads but don’t hang around. They might buy or subscribe to your product or service from a paid ad and then decide to end the relationship.

It’s similar to a standard churn rate in that it tracks the number of customers who convert but then leave your company. However, your PPC churn rate looks specifically at the customers who convert from your paid ads from platforms like Google Ads.

Why You Should Care About Your PPC Churn Rate

Most PPC metrics tell you how well your ads convince people to buy. For example, CPC tells you how much you spend to get one person to click on your ad. Conversion rates tell you how often people actually purchase from your paid ads.

Those critical metrics let you know if your ad and landing page match, if your targeting is on track, or how well your copy speaks to your audience.

There’s also a lot those metrics don’t tell you.

For example, how well does your onboarding process work? Do your ads focus on the features customers care about the most? Are customers disappointed with your product or service?

Let’s look at a (fictitious) example to see why PPC churn rates matter. I’m looking for a grammar tool, so I type in “grammar help.” The first ad is for Grammarly, and it says it will help me eliminate mistakes and find the right words.

PPC churn rate example

Say I decide to purchase based on that ad. However, a few weeks down the road I find the tool didn’t quite meet my expectations. Maybe it didn’t work as well as I had hoped, was too hard to use, or I found a better solution. I end up canceling my subscription.

Does that mean the ad didn’t work? No, the ad did what it was supposed to do, but something along the way didn’t meet my expectations.

If Grammarly is only tracking their PPC conversion rate and not their churn rate, they might not realize they are losing customers until it’s too late.

Here are a few things PPC churn rate can tell you:

  • how well your onboarding process works
  • whether customers’ expectations match your product or service
  • whether your competitors offer a feature you don’t
  • if your customer service is terrible
  • if your documentation is confusing

If you aren’t paying attention to what and why customers are leaving, you might be wasting valuable ad spend on customers who won’t stick around.

How to Calculate Your PPC Churn Rate

To calculate your PPC churn rate, you’ll need to calculate how many customers sign up from your PPC ads and then how many customers from paid ads you lose by the end of the month.

The formula you’ll use to calculate churn rate is:

(Customers who left by the end of the month / Customers from PPC ads at the start of the month) x100

For example, if your business has 100 customers who converted from PPC ads at the beginning of the month, and it loses 25 of those customers, you’d calculate your PPC churn rate like this: 

(25/100) x100 = 25% PPC churn rate

One of the biggest challenges of accurately tracking PPC churn rate is following customers that convert via paid ads throughout their lifecycle so you can tell when they churn. If you can’t access this data, you can use your overall churn number, but it won’t be quite as accurate.

If possible, use a customer relationship management (CRM) system or other customer lifetime tracking tool to see where customers come from and when they leave.

Strategies for Lowering Your PPC Churn Rate

Now you know how to calculate your churn rate and why it matters, but what happens if you realize there’s an issue?

If you are disappointed in your churn rate results, there are several ways to improve them. Let’s look at a few.

Figure Out Why Your PPC Churn Rate Isn’t Up to Snuff

The first step to addressing a high PPC churn rate is to identify why it is higher. This can be a challenge because there might not be an easy answer, or you might have several issues!

Start by looking at things like:

  • Has your software become outdated?
  • Has a competitor created a better solution or feature you don’t have?
  • Are there issues with the quality of your product?
  • Do you have a customer service strategy?
  • Do you provide documentation?
  • Is your onboarding process lacking?

Perform a competitive analysis and UX testing to try to locate the cause. Customer reviews may also shed light on where customers are struggling.

If you can find the source of your high churn rate, obviously, you can lower it. However, what if the cause of churn isn’t clear? Let’s look at a few other strategies.

7 Ways You Can Use Customer Loyalty to Lower PPC Churn Rate

One of the best ways to reduce churn rate is to make sure your customers are happy. After all, satisfied customers are far less likely to leave.

Here are a few ways to improve customer loyalty.

#1: Offer Loyalty Rewards

Rewarding long-term customers fosters a bond between your brand and your customers. Consider offering high-value customers early access to new features, a dedicated customer support line, or a free month for signing up for a new year.

#2: Make Customer Service a Priority

One of the top reasons customers churn is poor customer service. Don’t make customers wade through terrible documentation to figure out how to use your tool or service. Create an easy-to-use FAQ or video documentation and consider using a chatbot to provide timely service.

#3: Create a Community

People like to feel like they are part of something bigger than themselves. Creating a community lets die-hard fans interact with other customers, allows you to interact with customers, and can drive user-generated content you can use in other marketing efforts. Use a platform like Facebook, Reddit, or Slack to create a place where your customers can get tips, make new friends, and interact with your team.

#4: Reduce Customer Friction

Customer friction refers to anything that makes your customer’s life more difficult. For example, poor UX, a lack of training for customer support teams, or hard-to-navigate documentation. Making it easier for customers to buy, navigate your website, and get information improves customer loyalty by ensuring customers can get what they need quickly.

#5: Make It Easy to Get in Touch With You to Help Lower PPC Churn Rate

Good customer service is crucial to reducing your churn rate. Nothing makes customers cancel faster than struggling to get a hold of support when they have a question or an issue.

Start by responding quickly to messages and posts on paid ads. For example, Sipsey Wilder ran this paid ad on Facebook for their hip bags.

example of treating customers well, which could help your PPC churn rate

The ad has several hundred comments, and the brand made sure to respond to questions and requests from customers.

example customer review - lowering your PPC churn rate

Responding provides customers with the information they need and establishes trust.

Here are a few more tips:

  • In your PPC ad, provide the email address or phone number of your customer service or sales team.
  • Make sure your contact information is displayed clearly on your website and key landing pages.
  • Use a chatbot to provide answers to frequently asked questions.

If customers know they can get in touch with you and count on you to help them, they will be less likely to cancel your product or service when they get frustrated.

#6: Create a Smooth Onboarding Process to Lower PPC Churn Rates

Paid ads might convince a customer to convert, but the onboarding process can make or break how the customer feels about your brand.

Ensure your onboarding process is seamless. If people are confused about how to use or even set up the service your business provides, you have an issue. If customers don’t understand how to use specific features, they might not get any value from your product or service.

Here are a few ways to improve the onboarding process:

  • Make the process easy: Label documents and make them easy to understand. Add action items if necessary. For example, if users need to install a code or sign a document, make that clear and provide documentation to walk them through the process.
  • Ask what contact method they prefer: Some customers may prefer email, others phone. They might be in different time zones. Make sure you know when and how to contact them most efficiently.
  • Offer training and tips: Make sure customers understand how to make the most of your offering by creating an automated email campaign that shares tips on utilizing your tool or product.
  • Only gather the information you need: Some information is critical, like a customer’s language preference or email address. However, do you really need their physical address or company name? While that information might be great for your sales or marketing team, consider whether it benefits the customer or if asking will just annoy them.
  • Take your time: It might be tempting to explain how awesome your tool or service is right away. However, introducing too many features at once can be overwhelming to customers. Instead, use triggered popup boxes or spaced out emails to explain features over time. Start by engaging customers so they care enough to want to learn about all those extra features later.

You could also test your onboarding process every few months. There’s a good chance what works now might not be as successful in six months, or you might find that specific types of customers need more (or less) support during the onboarding process.

#7: Provide a “Cancellation Survey” to Those Who Cancel

If you’ve ever left a job, there’s a good chance you were asked to do an exit interview where the company asked why you were leaving and what they could do to improve. These interviews allow companies to gather honest feedback about things like work culture and management decisions.

Cancellation surveys serve the same purpose: Understanding why customers are leaving allows you to improve and prevent other customers from leaving.

When people go to cancel, attach a survey with just a few questions. For example, when the user clicks “cancel,” a question box could come up and ask why the customer is leaving.

Make it easy to complete by offering a multi-choice answer without too many choices so users don’t get overwhelmed and click away. For example, “too expensive,” “went with a competitor,” or “no longer needed the service.” Create an “other” option with an answer box so customers can leave more detailed feedback if they wish.

Conclusion

Tracking the effectiveness of paid ads starts with tracking metrics like CTR and quality score, but it shouldn’t end there. Tracking your PPC churn rate highlights issues that can tank long-term profits.

Start by figuring out why your churn rate is high and remember that several different issues may contribute to customers leaving.

Next, focus on improving customer loyalty, making it easy for customers to reach you, and streamlining the onboarding process. Finally, ask churning customers why they are leaving. You might find the answer to your problems is an easy fix; and if not, our agency here to help.

Are you struggling with high PPC churn rates? What strategies will you try first?

How to Lower Your Company COGS

Increasing sales isn’t necessarily the best way to improve your bottom line. A better solution may be to reduce your Cost of Goods Sold.

Paying less to acquire the products you sell can result in higher gross revenue figures and bigger profits, even when the amount of product you sell stays the same.

If you’re ready to make more money without selling more products, here’s a recap of COGS and specific strategies to lower expenses.

A Quick Recap of Cost of Goods Sold (COGS)

What Is Cost of Goods Sold?

The Cost of Goods Sold (COGS) is all the costs of producing and acquiring the products you sell. You can separate COGS into two parts: direct costs and indirect costs.

Direct costs are the expenses incurred when producing the products you sell. They include:

  • raw material costs
  • labor costs during production
  • other production overheads
  • the cost of wholesale products

Indirect costs are all the other expenses incurred when you manufacture products that aren’t tied directly to the process. They include:

  • storage
  • shipping
  • labor
  • custom duties
  • software
  • packaging costs

It’s also worth clarifying what COGS is not.

Your COGS is not the same as your operating expenses, for example. Both are expenditures, but operating expenses (also known as OPEX) are not tied to your products’ production. Instead, they include costs like rent, utilities, marketing, and legal.

They also aren’t the cost of sales either, as this infographic from EDUCBA shows.

COGS infographic

How Do I Calculate Cost of Goods Sold?

Businesses can calculate COGS using a standard formula that considers inventory levels and all of the direct and indirect costs listed above.

COGS = Opening Inventory + Purchases During a Period – Closing Inventory

COGS Formula
  • Opening Inventory is the value of inventory you hold at the start of a given period (like a financial year.)
  • Product purchases and all resulting costs (as listed above) are added to the opening inventory.
  • Closing inventory (the value of products that aren’t sold at the end of the period) is subtracted from that total to calculate the final Cost of Goods Sold.

Here’s an example:

Let’s say we want to calculate an e-commerce brand’s COGS during the 2019 financial year. The opening inventory would be the inventory recorded at the end of the 2018 fiscal year. Let’s say it’s $2 million.

The closing inventory would be the inventory recorded on the company’s balance sheet at the end of the 2019 fiscal year. Let’s say that is $3 million. Finally, the company purchased $5 million worth of inventory during the 2019 fiscal year.

The COGS for the 2019 financial year is:

2 + 5 – 3 = $4 million

The COGS is $4 million.

If you want to see what calculating COGS looks like in the real world, Investopedia provides an example using J.C. Penney’s 2016 financial report.

The calculation can also change depending on how you define closing inventory. There are three options:

  • FIFO (first in, first out): The first item you add to your inventory is the first item that gets sold. This option will minimize the COGS as long as the price continues to rise.
  • LIFO (last in, first out): The last item you add to your inventory is the first item that gets sold. If prices are rising, this will maximize the COGS and reduce profit.
  • Averaged costs: Costs are taken as an average, offering a balance between FIFO and LIFO.

Why Should I Think About COGS?

COGS is a crucial line on your balance sheet. By paying attention to it, you can:

  • Improve profit margins. Understanding how much you spend on products can help you reduce your e-commerce overhead.
  • Identify profitable products. Calculating your COGS will help you determine which products are most profitable and which aren’t.
  • Price accurately. Knowing your COGS will help you price your products. When you know the cost of every product you sell, you can make sure you’re pricing in a healthy margin.
  • Get taxed appropriately. COGS is a business expense that is deducted from your total revenue. In other words, you won’t be taxed on it because they are business expenses. This might be the only reason you’d consider a higher COGS to be a good thing. Remember, however, that higher COGS means less revenue and, therefore, less profit.

7 Tips to Reduce COGS

Now that you’re up to speed, it’s time to get to the heart of the matter and look at how you can reduce your company’s COGS.

I’ve outlined seven strategies below that almost any business can leverage.

1. Stop Making Products That Don’t Sell

Do you have a large amount of deadstock sitting in your warehouse? These are products that haven’t been sold and are unlikely to sell in the future. If so, they could be killing your margins and contributing massively to your COGS. Remember, the COGS calculation takes into account the inventory you have at the start and end of your accounting period. It doesn’t matter how long it’s been sitting there: it’s going to be in the calculation.

Deadstock isn’t great, but there’s an easy way to make sure it doesn’t increase your COGS going forward: Stop making products that don’t sell.

Of course, no business owner starts out intending to make a product consumers hate, but it happens. Even the biggest businesses have flops now and again. New Coke, anyone? I didn’t think so.

Don’t worry about creating the wrong products, only worry about identifying ones that aren’t selling well. Use inventory management software to identify products languishing at the back of your warehouse.

Encourage customers to review your products to drive real-time feedback from the people that matter most. Then act quickly. As soon as you identify an under-performing product, take steps to decrease production or cease selling it altogether.

2. Find Lower Cost Materials

Material costs are probably one of the largest components of your COGS. Typically, there’s no shortage of material suppliers, which means you may be able to find cheaper products somewhere else.

Shopping around for materials from different suppliers is one solution, but you could also consider whether a part of your finished product could be replaced with a cheaper alternative. You may think that your customers love the sturdy metal used in your product, for example, but they could be just as happy with a plastic substitute.

It may also be worth revisiting technology used in production to identify whether new processes mean cheaper materials can be used.

Whichever strategy you use, be careful of using cheaper materials at the expense of your end product. Providing a consistent experience is one of the best ways to build trust in your brand, and customers expect to receive the same product every time.

Even loyal customers can quickly switch to competitors if your products are not up to their expectations. A drop in sales can be far more significant than any savings you’ve gained by switching materials.

That’s not the only downside you need to consider, however. Inferior materials can also reduce the durability of your product. Changing materials may necessitate a change in the manufacturing process. This could increase production overheads or labor costs to such an extent that they nullify any costs saved.

3. Eliminate Costly Waste

There’s bound to be waste somewhere in your supply chain. Your manufacturing process may be inefficient, for example, and waste a lot of raw materials. You may even need to pay to dispose of them. Shrinkage may also be significant. This is when products are damaged, stolen, or go missing.

Waste doesn’t have to be physical. There could be plenty of time wasted in the manufacturing or shipping process that could be reduced to improve your COGS. Downtime can be expensive, whether that’s on the factory floor or when products are at sea.

Investigate all instances of waste in your supply chain, physical or otherwise, and take actions to reduce or eliminate the most expensive culprits.

One strategy could be to redesign the manufacturing process if material waste is significant. Another could be to alter transport arrangements if shrinkage is high and many products are arriving damaged.

4. Automate Parts of Your Business

Labor can be a significant part of your COGS. Luckily, you may be able to automate some of those expenses away. Every part of the manufacturing or shipping process that you can replace with a machine can save huge costs. Machines are typically cheaper to operate in the long run, there is less risk of error and have practically no downtime.

Once you’ve done your part, ask the same of your suppliers. Request they invest in automation to reduce costs if they haven’t already. You may even be able to use this as part of a negotiation strategy as discussed below. If they’re not willing to play ball, consider switching to another supplier investing in automation. If they aren’t cheaper right now, they could well be in the future.

5. Investigate Offshore Manufacturing

Manufacturing in the U.S. (or your country of origin) can often be a huge selling point. It can also be incredibly expensive. That’s why so many of the world’s biggest brands outsource manufacturing operations to countries like China, Taiwan, and Vietnam.

Both raw materials, labor, and utility costs are often much cheaper in these countries than they are at home, meaning your business stands to save in multiple ways. Even when you factor in increased shipping costs, your COGS could still plummet when you outsource manufacturing.

Only large enterprises should consider this strategy, however. The upfront costs can be substantial, and there are a lot of risks involved.

Quality problems may arise, for instance, and you may have to deal with PR issues as a result of labor conditions in these countries. Currency fluctuations and customs duties can complicate matters further.

For some businesses, however, the opportunity to drastically reduce their COGS will be well worth it.

6. Consider Manufacturing on Demand or Dropshipping

One of the biggest contributing factors to COGS is inventory purchases made throughout the year. The more products you buy, the more costs rise.

Rather than stock products that may not sell, brands could reduce their COGS by using a manufactured on-demand strategy. In essence, you only make or order products when a customer has already paid.

Print-on-demand sites like Printful and dropshipping are two of the most-common ways to leverage this strategy.

COGS Printful

With Printful, products are printed in real-time as soon as an order is made. There’s not even a minimum order limit.

It’s the same with dropshipping. Businesses only pay for products when the customer pays for them. In both cases, items can be shipped directly to customers, meaning stores don’t need to hold any inventory.

7. Negotiate With Everyone

You can and should be regularly negotiating prices with every company in your supply chain. The prices you pay suppliers are a core part of your COGS. Reduce them, and your COGS will decrease, too.

When I say every company, I really do mean all of them. Manufacturers, raw material providers, logistics companies, storage facilities, and wholesalers are all able to give you a lower price if you ask.

Here are some deals you could ask for:

  • lower per-unit prices
  • bulk discounts
  • lower prices in return for quicker payments
  • lower prices in return for upfront payment
  • lower minimum order requirements

Remember, negotiation is a two-way street. While some companies will be willing to lower prices just to keep your business, others will require something in return to sweeten the deal. Improving their payment terms, for instance, is always a useful bargaining chip.

It’s also important to remember your negotiations may have unintended consequences. Asking for bulk discounts will require you to store more products, for example, and come with a cost increase that may eclipse any savings you made. Asking for lower prices in return for faster payments may require you to improve your cash flow.

Think carefully about what you are asking for and make sure you can handle the consequences of your negotiations. The last thing you want to do is renege on a deal because you negotiated poorly.

Conclusion

Boosting your sales is essential, but so is reducing your company’s COGS. Whether it’s negotiating hard with suppliers, reducing waste, or automating your processes, look to reduce costs in every way possible.

I’ve given you seven strategies to get started with, but there are always more ways to reduce costs.

What innovative ways to reduce costs have you found?

Soteris (YC S19) – hiring employees #3-5 in SF to lower insurance pricing

Hi – my name is Sunit. I founded Soteris because the way insurance rates are currently set results in massive inefficiencies that increase prices for policyholders like you and me. From years of experience, I know for a fact that a machine learning approach is orders of magnitude better than what the largest insurers do – and our customer list is proof of that claim.

Before Soteris, I built a $750 million property and casualty (everything that’s not life or health) insurance company from scratch, out of a $16 billion hedge fund called Pine River Capital. This gave me deep visibility into how insurance works, through which I saw firsthand how much of the insurance value-chain is terribly outdated and littered with processes that might have made sense in 1920 – but are way past their prime in 2020.

These inefficiencies lead to increased prices for policyholders, and they can all be solved by better use of existing data, so I started Soteris to do just that. In a short time, Soteris showed its first customer that our software could solve these problems to the tune of more than doubling their policy profitability. They plan to drop rates for at least 80% of their applicants as a direct result of the efficiencies Soteris’s software provides. I think that’s pretty cool.

Soon after, Soteris signed two enterprise production contracts providing almost $1m in contract revenue – at which point it was still just me at the firm, so I started to build out the team from there.

Today that team is two PhDs with over 20 combined years of experience deploying algorithms in financial markets. We just raised a large round from a number of top investors, including YC, Amplify Partners, Khosla Ventures, and Data Collective. Combine that with a lot of early revenue and a low burn rate, and we have a long, ample runway to execute our mission. What else would you expect from a team from finance?

WHAT YOU’LL DO

We’re primarily looking to build the team along two verticals: machine learning and back-end infrastructure. We work in Python, but the specific toolset you’ve used is less critical than your ability to adapt. You’d be doing the following:

* Defining our technical strategy and direction during a critical period in our growth

* Helping build and maintain our cloud infrastructure

* (ML specifically) Building the algorithms we use to produce the output and analysis that we feed back into customer workflows, including data exploration, model selection, hyperparameter tuning, and iterative analysis

* Creating data processing pipelines to simplify the onboarding and normalizing of highly heterogeneous customer data sets

* Establishing the coding standards and agile and collaborative engineering culture and that will allow the whole team to thrive

* Setting up our processes to optimize the accuracy/speed-of-delivery tradeoff as you see fit (e.g. unit tests, automation, our code review process, etc.)

* Working with clients to understand requirements, formulate use-cases, and build pragmatic solutions

If you’re interested, please apply here: https://www.soteris.co/#careers


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