Monthly Archives: January 2010
How Much Would You Pay For A New Customer?
What if there was a store that sold customers? No, not a store that sells to customers, I mean a store where small businesses could go and purchase new customers. And let’s say that store has all types of customers on the shelves, like in real life, difficult customers, cheap customers, average customers and even best customers.
Let’s deal with factor one first. How much would you pay for a new customer? Isn’t the amount you would pay for anything determined by the value of the product or service. The same rule should apply to customers. So before we ask the question, how much are you willing to pay for a new customer, let’s ask how much is a new customer really worth. Here’s one method you can use.
Small Business Example: ABC Dry Cleaners
Work out the numbers for your business and go on a shopping spree! Buy as many new customers as you can. But wait minute, you might have a limited amount of cash on hand. Furthermore, your cash flow may not allow you to wait up to two years to recover the profit. That brings us to factor number two: your budget. The most important thing to consider here is being consistent. You can start with a small budget and expand it as cash flow permits. Determine a budget that you are comfortable with and then stick with it.
Don’t despair, you can get new customers with advertising. But you’ve got to pick an advertising method that is measurable. Door hanger distribution is very measurable and it is cost effective. You can even target the type of customer your looking for (your definition of the best customer), by picking neighborhoods based on home values and proximity to your business.
Keep close track of the results of your door hanger distribution efforts. Then compute your cost per customer: Cost of the distribution divided by the number of customers generated. By fine tuning your door hanger design and special offers you can increase the response rate and lower your cost per customer.
Advertising isn’t easy, but if you know the cost to generate a new customer and the value of that customer, you will be well on your way to running successful advertising campaigns.