#23 How Ours use Paid Ads to grow 48% MoM
plus how to know if Paid Ads are right for your business, CAC and LTV expectations, navigating data regulation and more...
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One of my goals for The Hemingway Report is to share best practices from across the mental health industry.
That tough problem you’re trying to figure out? Someone has probably solved it already. But where is that info? Where is the guide?
I’m on a mission to gather this information and share it in way you can use.
I want to get down in the weeds and give actionable advice - the type of stuff you can take to your team and start implementing today to drive results.
Today is our first post of that kind, and we’re discussing a topic I know a lot of founders grapple with, how (and when) to use paid ads in your mental health startup.
To cover this topic, I’ve been chatting with Adam Putterman, the Co-Founder of Ours and a guy who knows A LOT about paid ads.
Ours is a virtual couples therapy business and they’ve been using paid ads to grow 48% month on month. Very impressive stuff.
In this post Adam shares with me everything he knows about using paid ads in mental health startups. Whether you are just starting out or running a scaling mental health business, this post is full of helpful frameworks, hard earned lessons and little nuggets of wisdom.
We’ll cover;
- Why paid ads are not just for growth: How to use Paid Ads to accelerate your path to product market fit and prioritise your product roadmap
- If paid ads for you: A framework to assess if paid ads are the right strategy for your product and business
- Paid search deep-dive: How Ours use paid search to drive growth, including deep dives on conversion rate optimisation
- Conversion rate optimisation: The key to successfully scaling paid ads
- CAC and LTV expectations: What’s a good CAC, how to know your LTV and what to do if you don’t
- Improving cashflow: Success in paid ads is about more than just CAC:LTV, we discuss the importance of cashflow and how to improve it
- How much to spend: A very common question, we discuss a framework for calculating that for yourself
- Data challenges: Some of the regulatory challenges of running ads for a healthcare business and the product Ours built (and you can use) to stay compliant whilst maximising performance
As always, a little bit of context so we are all on the same page…
What do I mean by paid ads?
This is the term we use for any marketing strategy where businesses pay to display ads to a targeted audience, usually online. The main channels are Search (Google, Bing etc.), Paid Social (Meta, X, Snapchat, Reddit) and Display.
It doesn’t include channels like affiliates, influencer marketing, content marketing etc.
This is an important topic because it has become the most dominant marketing strategy in business. If you are thinking about how to acquire users, drive adoption of your product or even recruit providers, you need to understand paid ads and how it might fit into your strategy.
But… paid ads actually serve more purposes than just growing your customer base and that’s where I want to start…
Paid Ads: not just for growth
When you think about paid ads, you probably think of it as a tool to drive growth. But there are two other powerful ways you can use paid ads in your business.
“Paid ads can serve multiple purposes depending on the stage your business is at. One purpose is to support demand testing and experimentation.”
Adam Putterman
Accelerating the path to Product Market Fit
The first task for any founder is to find Product Market Fit. To do that, you need to be talking to users all the time, getting them to actually use your product and getting feedback on it. You need to be experimenting. Most founders get that, but then they say “wait, where do I get these all-important users from?”
Paid Ads is one way to access a steady stream of users and accelerate your experimentation cycle. Of course, there are other ways to get early users, but if you don’t want to wait around for organic sign-ups you can put a few hundred dollars into a paid marketing campaign and get a steady stream of fresh users every day.
One clever tactic used by both Ours and Mindset Health is to create small scale, rapid experiments using ad copy and landing pages. It’s a cheap and fast way to get user feedback on what you should build before you invest in actually building it.
Here’s how it works.
Say you have an idea for a new feature or product direction but you’re not sure if your users will like it. You create an ad with copy and a landing page promoting that product or feature, label it as “coming soon” and allow people to submit their emails if they are interested.
Evaluate the performance of the ads and the number of people who signed up. If performance is good, it’s a great sign that your product idea has legs. If not, you can decide to kill it there and then.
You can even use it to test how position your product with users.
“In the early days, we used Reddit ads to test copy and language. Reddit is really responsive and really brutal as an audience which was exactly what we needed”.
Yes, talking to customers during research is extremely useful, but getting hard data on how the market actually responds to your product is a true test of viability. Using paid marketing is a great way to run these tests quickly and cheaply.
Adam also used Google in the early stages to get an initial volume of clients that he could iterate on the product with.
“We used Google to get our initial volume so that we could do a lot of product development and innovation.”
Product Refinement and Roadmap Prioritisation
After achieving Product Market Fit, you can evoluve this strategy to use paid ads for continuous product refinement and roadmap prioritisation.
“Let's say you've built a platform, it's working, you're serving people, but you have a roadmap that is ten miles long of features you want to build. How do you prioritise those features? You're talking to customers, but at some point you just need a certain volume of people going through the experience each week in order to get feedback and figure out what you need to build next.
Paid marketing is a great way to do this because it’s controllable. You can say, ‘we're ready to take 30 people and no more’, you can turn on ads until you hit 30 and then turn them off again.”
These strategies take the benefits of paid ads (speed, control and scale) and uses them to solve your product challenges in a systematic way.
While these are definitely helpful use cases for paid ads, the primary use case is still in driving growth.
So we should probably talk about that…
Paid Ads - are they for you?
A lot of people ask me if they should be using paid ads to grow their business. That decision comes down to six factors;
1. LTV: Do you generate enough revenue and margin from your customers to justify the costs of paid ads. The cost of acquiring a customer should be approximately one third (or less) of that customer’s LTV. There is a floor to what it costs to acquire a customer through paid ads, so if you have a very low LTV product (say <$100), then it probably won’t be a runner for you.
2. Payback period: related to LTV, you need to understand how long it will take you to make your money back. If the gross profit from your first purchase is greater than your CAC (Customer Acquisition Cost), then paid ads could be a great strategy.
It’s important to note that a good LTV:CAC ratio doesn’t guarantee this however. You need to look at the cashflow profile of the LTV. If your users’ revenue is spread out over several years, it might take a long time for you to recoup the investment in paid ads. That will be a cashflow nightmare.
3. Conversion Rates: How good are you at converting traffic to customers? Is your product something that can be easily bought online? If you have a very complicated buying journey (or are not good at Conversion Rate Optimisation - creating landing pages, user flows, nurture campaigns etc.), getting paid ads to work will be really hard.
4. Product-Channel Fit: Does the nature of your product fit with a paid ad channel. The products that work best on Paid Social are those that are highly visual. Ones where you can show a physical product and the benefit of that product in a video or photo. It’s for this reason that neuromodulation headsets will perform better than a CBT app on social.
Getting an app or therapy platform to work in paid social is really hard - how do you show it to people? Your only option is to have people talking about the product and it’s benefits and that’s not always compelling.
This is a sample of a Better Help ad.
It’s just a guy, talking about Better Help. By the way, my life goal is to have a moustache like this man…
But compare that add to this one for Teeth Whitening…
Which one do you think performs better?
Kinda gross, I know, but I wanted to prove a point.
That’s what you need for paid social.
If you want to work on Paid Search, you’ll need to know that there is existing search volume for your product. If they aren’t already searching, no amount of search ads are going to get them to buy from you.
5. Availability of alternatives: let’s be honest, paid ads are expensive. If you have an alternative, cheaper acquisition channel that is working for you, then you’re going to want to use that. Most growth comes from one or two channels that you double down on. So if you have one already focus on that and don’t get distracted by paid ads.
6. Enjoyment: Adam made this great point which I hadn’t thought of… you should actually enjoy what’s involved with running paid ads as a strategy. As an early stage founder, you’re going to need to be hands on with your paid ad campaigns (more on that later). Some founders might hate that idea, but you need to understand what you’re dealing with. At the very least, so you can hold employees and agencies accountable if you use them in future.
So, let’s say your business and product is suited to paid ads, how can you use them to actually deliver results.
A quick word of warning here…. Paid ads are one of the fastest ways to incinerate cash. Trust me, I’ve seen it.
So you need to know what you’re doing.
Let’s get into how Adam approaches running paid ads with Ours…
How Ours are growing 48% MoM with paid ads?
Growing more than 40% each month is pretty incredible. So what are Ours doing?
After testing a bunch of channels Ours landed on two that work for them, Paid Search and Affiliates. In this post, we’ll focus on paid search (if you want a separate deep dive on affiliates, let me know).
Paid Search works for Ours because, frankly, a lot of people are already searching for their kind of service. They have Product-Channel Fit.
“If someone is searching for ‘Virtual couples therapy’ I know they are someone who is in the market for our service.”
I classify marketing strategies by whether they create demand or capture demand.
Paid Search falls in the second category. It is not increasing the number of people searching for “Ours” or “virtual couples therapy” but it is extremely good at capturing those people who are already looking for it.
“I think one of my favourite marketing axioms is ‘stop trying to convince people to use your product and just find the people that already want it’. And if someone is searching for it, they already want it.”
Find the demand that is already out there, and capture it.
Now let’s dive into some of the specific tactics, metrics and organisational structures that Adam uses to drive paid ad growth at Ours.
In-house versus outsourcing?
Should you work with an agency or try and run things in house for paid search?
Adam has adapted his approach to this question over time based on four different stages of their growth.
Stage 1 - On The Tools:
“Early on, we did it all ourselves because we really wanted to learn it. We just did it all ourselves.”
At this point Ours were just testing out a new channel and wanted to make sure they understood exactly how it worked.
Stage 2 - Expert Guidance:
Once they saw signs of positive results, they wanted to up-skill and increase their capacity to manage larger campaigns.
“We brought on an expert consultant to train us up. We wanted to figure out what we didn’t know.”
Adam also used this as an opportunity to train up other team members, so he could start to extract himself from the day-to-day of running campaigns;
We gave responsibility for paid search to someone on the team she was able to work with the consultant to become an expert.
Stage 3 - Agency Outsource:
In stage 3, paid search was scaling and Adam brought on an agency to see if they could maximise results.
“At this stage, paid search was working well for us. It had scaled. We wanted to know, can this mega scale? Like, can this drive absurd growth? And that was when we brought on a really exceptional agency and they took over the whole thing. They grew it and did very well.”
Note: when talking to agencies, make sure they build their own costs into the CAC targets you need to hit.
Another note: if you are looking for a marketing agency or freelancer that works with healthcare companies, Adam has pulled together this list that you can check out.
Stage 4 - Back in-house:
After a while working with the agency, Adam felt the campaigns were at a point where they could be brought back in-house in order to reduce costs.
“We felt like it had come to a somewhat stable position and we had learned a ton about how to do it ourselves. So now we're back to doing it all ourselves.“
Adam has one team member with full responsibility for paid search performance;
“I'm a big fan of extreme ownership so we have a growth manager that owns the entire channel. It all falls under her, so there's no distribution of responsibility.”
My takeaway here is to understand that there are benefits to in-house, outsourcing and everything in between. Adam’s four stages is a helpful guide, but at each point of your maturity with paid ads, you should think about which one is best suited to you. Adam works through cycles and finds that bringing in a fresh pair of expert eyes every six months or so gives a bump in performance and helps them avoid blindspots.
Ours are using paid search to capture high intent audiences.
But getting ads in front of these high intent audiences is not cheap. For this to be profitable, Ours need to make sure they have high conversion rates through their funnel.
And that all comes down to three little letters, C-R-O.
Conversion Rate Optimisation (CRO)
If you’re running paid ads as a strategy, you should be spending as much time and effort on CRO as you are on your paid ads.
Why? First, because whether you convert 2% or 10% of your traffic, you’re still spending the same amount of money. But in the latter scenario, you’ve got five times the revenue and a fifth of the CAC.
Great CRO is the key to a scalable paid ads strategy.
If you have a high converting funnel, then you can scale your ad spend to increase the number of new customers whilst maintaining strong economics. But if you have a leaky funnel and try to scale your ads, you’ll quickly burn through cash.
To do this, Ours focus on their landing pages, user journey and nurture flows.
There’s lots of best practice content already out there for these three items, so let’s just look at some of the specific things Ours do.
When you click on an ad, you arrive on a landing page with copy related to what you just searched for. If you asked Google for “pre-marital counselling”, well then that’s what you’re going to see on the Ours landing page. Nothing crazy, but it’s these small details in the journey that add up to better conversion rates.
Ours also crafted a user journey based on a deep understanding of their users - the type of understanding that other D2C founders like Mindset say is absolutely necessary to succeed.
They know a lot of people might be sceptical of their service and unsure about what they want, so they’ve tailored their journey to address those concerns. Their first main CTA is focused on offering a consult call to new users.
“The consult call is with a licensed therapist who's going to figure out what you want, what you need, hear your concerns, hear your preferences, and then based on all of that, match you with a very specific therapist in our network who's perfect for you.”
This is a great offer to new potential customers: “for just $50, you can book in a chat with someone to help find the right therapist for you and your partner, if you don't like it, hey, you’ve only lost $50.”
For people who fall out of this journey, they get put in an email nurture campaign addressing the specific objections they might have about Ours, stuff like “what to do if your partner is hesitant about therapy”.
Email capture - yes or no?
I did tell you we were going to get into the weeds…
One CRO related question that gets asked a lot is “when should I ask for an email?”.
People worry that asking users for an email too early will put them off. But in the Ours journey, it’s one of the first steps. I asked Adam why.
“If you're not willing to verify your email, you're probably also not willing to spend $200 on a really high quality therapy session.”
We’re often afraid of kicking people out of our funnel, but ask yourself, was that person ever going to buy from me anyway? If not, you actually want to kick them out of your funnel as early as possible.
What sort of CAC should you expect from Paid Search?
If I could give you a specific answer to this, I would. Of course, I can’t, but myself and Adam discussed a helpful framework for determining the CAC you should be paying.
The first approach is to work back from your LTV:CAC ratio. You should be aiming for a ratio of at least 3:1. So if you know your LTV, your CAC (which includes ALL marketing costs) should be one third of that number.
Don’t know your LTV? I’ve got some options for you below, keep reading….
One other thing Adam pointed out is that you need to be very clear whether you are going after cash payers or people covered by insurance - and to have different CAC expectations for each.
“The biggest thing you have to think about is the first node of the decision tree - are you cash pay or insurance? We're talking about two wholly different worlds that do not touch in terms of CAC.”
What sort of CACs do we see in the virtual couples therapy market?
“The best CAC I've heard on a cash pay therapy company was probably like $25 to $50. The worst was probably $1,000 or $2,000, which is very high! The average that I've heard at least is in the $200 to $400 range. Insurance is obviously very different, but on the cash pay side, that's at least what we see or from other founders in the market.”
CAC Reporting
I wanted to learn more about how Adam structures his KPIs and reporting for his team.
One challenge with metrics is that they can often incentivise the wrong behaviour. If you’ve been reading The Hemingway Report for a while, you’ll remember my joke about getting “show me the incentive and I’ll show you the behaviour” tattooed across my chest…
Anyway, one challenge with an overall metric like CAC, is that it can discourage the team from experimenting - the type of experimentation that is needed at startups in order to achieve high growth and drive costs down. By their nature, experiments with new campaigns can go wrong, and if they do, they have the potential to blow up your CAC.
So if a team is only incentivised on overall CAC, they’ll just play it safe and avoid any campaigns or tests that could damage it. Over time, this drastically limits your ability to create step changes in performance.
Adam has a clever way of getting around this. He has his team report on three different CAC numbers;
- Overall CAC: This is your actual CAC, taking into account all marketing spend and customers.
- Core CAC: This is the CAC from your core campaigns, the ones that run every single month and have the majority of spend and customers
- Experimental CAC: The CAC for specifically designated experimental campaigns.
Ours still need to hit their overall CAC targets, but having a “Core CAC” metric gives them the freedom to try out new things in their experimental campaigns, without worrying about messing up the results of their Core CAC campaigns.
This ensures the team are correctly incentivised, with clear overall targets but also space to experiment.
Knowing your LTV… and what to do if you don’t
LTV (Lifetime Value) is the total value of a customer across their lifetime with your business.
If you’re in the early stages of your business, it can be tricky to know your LTV. You just haven’t had any customers for long enough. So what do you do?
You can build a forecast making assumptions around repeat purchase rates and churn. That’s OK, but it can be very hand wavy. If you do this, be very careful with your assumptions and err on the side of conservatism. Pretty much every LTV forecast I’ve seen overestimates repeat purchase rates and underestimates churn.
The other option is to accept that, for a while, your LTV will be a slightly unknown quantity. You should then spend cautiously until you get real data that makes you confident in your LTV numbers, at which point, you can start to ramp things up.
It took some time for Adam to be really confident in the LTV they could expect
“I don't think we felt really confident in it until we had run it for a year”.
The last option (which Adam suggested) is very clever. You can look at comparable businesses to yours - ones who have been around a lot longer - and use their LTV as a benchmark.
“I feel pretty confident talking to private practices and group practices, hearing what their numbers are and thinking we're going to see about the same thing. Maybe we're 20% better because we have a really sophisticated, nurturing flow, but maybe we're 20% worse because we're not in-person. But it's going to be within that range.”
Whatever method you use, you want to be constantly updating your LTV based on the latest real world data you have.
One last top tip here; make sure to segment your customer base by LTV and see if there are aunty clusters of high or low LTV customers. Do the same for CAC. You might be surprised by what you find.
If you find these clusters, you can adjust the targeting of your marketing accordingly, increasing your average CAC:LTV.
Improving payback and cashflow
One big challenge with paid ads is its impact on cashflow. You have to pay for the ads up-front, then wait (and hope) to get the money back from customers over time. This can create real cashflow headaches.
One way Ours get around this is by offering packages of therapy sessions up-front, increasing Average Order Value (AOV) and bringing forward cashflow. Ours customers like these as they actually get a discount versus paying for each session individually.
And it’s great for Ours because they get to collect the cash up-front, reducing their payback period and improving their cashflow. Win-Win.
How much should I be spending?
Another question a lot of founders have is “how much should I be spending on paid ads?”.
Adam has a good answer for how you can approach this.
“In the early stages, it’s pretty simple, it’s just going to be a flat amount based on how much you can afford within your budget.”
You set the dollar amount and then try to maximise what you get for that.
“In later stages, you need to work backwards from your growth targets. What growth rate do you need to hit? How many new customers do you need to hit that? What CAC can you expect to acquire those customers at?”
That will tell you what you need to spend to hit your growth goals.
Getting past data challenges
Pixels are the secret fairy dust of paid marketing. You place them on their site and they feed information back to the ad platforms that allow them to optimise their performance.
But without them, the platforms are almost useless. They are shooting in the dark.
One major challenge for health companies using paid ads is that some use of marketing pixels can breach HIPAA. When this rule was introduced, a lot of mental health companies realised they had to remove their marketing pixels from their sites.
They did. And their ad performance tanked!
Ours faced this challenge. They explored some workarounds but in the end, actually built a custom solution to ensure they stayed compliant without destroying their ad performance.
“We set up our own system that would essentially strip out all of the PHI, but still allow us to optimise for events by sharing obfuscated, hashed, or hidden data with Google and Facebook so that we could tell them the ads are effective in this way or not effective, and they could optimise using that data.”
This solution worked so well that they turned it into a product that any healthcare business can use. If you are running paid ads and want to check it out, you can find it here. I’m not affiliated or anything, just think it’s a very useful product.
What other things has Adam learned about running paid ads?
Adam learned an interesting lesson from a campaign that failed. He ran hyper-targeted, state specific search ads, focusing on terms like “ Washington couples therapy”. The conventional thinking is that these ads perform better than less personalised ads. And in general, that’s true, but not here.
In fact, they ended up performing worse than their generic ads.
When Adam started thinking about it, he realised why.
“If someone is searching for Washington couples therapists, more often than not, it's because they want to go in person. We don't offer that. So it just doesn't matter that we're better or more convenient. They want to go in person and that's why they're adding a geographic qualifier to it.”
Makes sense!
It’s only through actually running campaigns and analysing your results that you’ll get these insights for your own business.
OK, breathe.
That was a lot…
But I hope you found it all helpful.
If you did, and want more posts like this, where I share best practices from operators in mental health, just let me know. I’ll make them for you. Or go one step further and let me know what topics you’d like me to cover.
That’s all for this week. Many thanks to Adam for his time in creating this post with me.
Feel free to subscribe if you have’t already or share this post with someone who might find it useful.
Keep fighting the good fight!
Steve
Founder of The Hemingway Group
P.S. feel free to connect with me on LinkedIn
