You know that marketing is critical to bringing in business. It feels like you’re doing the everything you can – you’re certainly spending plenty of money on that digital media campaign, and sponsoring the latest golf tournament promises “good exposure”.
But is what you’re doing actually bringing you customers?
When you measure the right things, you’ll be able to answer that question easily – then your marketing becomes an investment that has a predictable return.
You need to know these three numbers:
- Your cost to acquire a lead
- Your cost to acquire a customer
- The lifetime value of your customer
Once you know these you’ll know exactly how much to invest in marketing, and whether it’s working for you. Let’s say your acquisition cost for a lead is $50 and your acquisition cost for a customer is $100. If you want 100 new customers, you need to invest $10,000 in marketing ($100 x 100 customers). Test and measure what works, and execute those strategies. If it costs you more than $100 to land a customer, that particular strategy isn’t right for you. There won’t be a “silver bullet” strategy that brings you hundreds of great customers, but there will be 10 strategies that bring you 5 customers each, and you’ll need to work every one of those.
Here’s an example:
One of our first clients 15 years ago was a carpet cleaning company. They loved Val-pak® advertising. Every time they ran a couple of zip codes, the phone would ring and they would land new customers. Yet they were losing money—couldn’t make payroll. How does this happen? Like this:
- Val-pack® customers had an acquisition cost of $150
- The company’s average dollar sale (3 rooms) was $145
- Most households get their carpets cleaned once every 3 years based on where they get the best coupons—there is zero customer loyalty because they’ve been conditioned to find the best price. So the lifetime value of a Val-pak® customer is $145.
- Not only did Val-pak® advertising attract price-shoppers, the company lost money on every sale. There was no opportunity to sell additional rooms—3 rooms was already an upsell!
This company was literally selling themselves out of business with this strategy. You know what strategy proved to be a slam-dunk for them? Referrals. Once they learned the right way to systematize referrals and trained their people how to ask for them, profitable business began coming in the door consistently.
These numbers are simple, and critical to bringing you profitable business!
About ActionCOACH: Susan Thomson and Mike McKay own ActionCOACH Business & Executive Coaching of Wisconsin. Imagine a team that can take you from the chaos and stress of running your business to making more money, growing your team, and gaining freedom!
MakeMoreWorkLess.ActionCOACH.com
608-441-374, SusanThomson@ActionCOACH.com