How Much Are You Prepared To Spend To Acquire A New Customer?

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The problem with Marketing is that these days there seems to be so many options on how to spend your marketing dollars.

Added to all the traditional forms of marketing we now have social medial to consider. Regardless of the type of marketing you use you could still be burning your marketing dollars if you don’t know about and understand your customers LTV (Life Time Value).

But don’t worry…

I’m here with a solution to help you make sense of it all by using one of the Strategies we implement in our Grow Business Grow Boardroom Programme called Reverse Thinking®

The solution is simple…as most great solutions are…

You need to know in advance how much you can spend to get a new customer…this is a critical piece of information and usually leads to an easy answer of which type of Marketing to choose.

Let me give you an example…

A coffee roasting company, runs a promotion that costs $12,000. The promotion invited potential customers to accept a free coffee maker valued at $51.95 if they bought a sampler selection of fresh roasted coffee blends for $34.95.

Part of the deal was that the customers simply consider a ‘til further notice’ home delivery service—an order of their preference would be sent to them monthly and charged to their credit card. (They were under no obligation to sign up for the ‘til further notice’ agreement. They merely had to consider it. And regardless of their decision, they could keep the coffee maker.)

The hard cost of supplying the free coffee maker and the sampler pack leaves a net profit of $1.00 per response. When you factor in the $12,000 for an advertisement, you’d immediately conclude that 12,000 responses were needed just to break even, wouldn’t you?

Based on that, you’d probably think the coffee company would be mad to do it, wouldn’t you?

But let’s look more carefully at the numbers.

For each person who takes up the ‘til further notice’ arrangement the average annual gross profit is $245. So the response rate required to break even falls from 12,000 people to just 49!

We also know the average customer continues to buy for at least 3 years and refers an average of 0.2 new customers, so the numbers become even more interesting. The lifetime value of a customer from this promotion, then, is at least $882.

So by testing, we discover 100 out of 300 people respond to the offer and say thanks, I love this arrangement and I love your coffee—please continue to send it to me.

We’ve just turned a $12,000 investment into an $88,200 return over a 3-year period!

Do that 4 times per year and you create a return of $352,800 from a $48,000 investment.

This kind of thinking and information is invaluable, isn’t it?

These are the types of strategies and thinking that you will be exposed to when you are enrolled in The Grow Business Grow Boardroom Program…it was pivotal in my business growth.

Our way of doing things is unique and it’s why it produces unique results for our clients…

We would love the opportunity to help you clear your head on what is the right way for you to accelerate your business… 

We highly recommend you watch this step-by-step case study of how we grew Beefy’s Pies into a Famous Aussie Icon from a small stressed out bakery into a family owned chain. Click here to get all the insights into their success…

Or if you have heard enough about how we work with our small business owners, then let’s have an off the record chat about your current situation and see what we can do to immediately guide you…click this link to see what time best suits you.

P.S. Ask if our Boardroom Program intake is open for enrolments…It works best for business owners who see the benefit of having us on as their ‘external partner’ so that they are not alone in the day to day decisions of their business. 

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About the Author:

Wayne Hutcheson is a Coach of the highly regarded Grow Business Grow Boardroom Program. He works closely with a hand full of clients to help them achieve growth in their business and to enjoy 'guilt-free' time away from their business without it affecting their profitability.
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