Please follow and like us:

 

entrepreneurs

Why It’s Critically Important Savvy Entrepreneurs Know The Real Cost To Acquire A Customer!

Alright, clearly by now it’s no real secret that running a successful business, on or offline, requires an awful lot of continuous hard work and commitment, correct? Absolutely.

In fact, extremely savvy entrepreneurs, (such as yourself) often find, that unless they quickly get a handle, on the ongoing expenses of attempting to run a business.

They will probably spend more than they really should, where they absolutely can’t afford to do so!Sound familiar?

Case in point, (sadly) a ton of brand new startup entrepreneurs, (when you get) right down to it.

They really have absolutely no clue, what a brand new “first time” customer, patient and or client, is actually worth to their business and or service, over the total lifetime of that customer, being a part of their business.

So in other words, the average newbie small business owner and or service provider, literally has no realistic idea whatsoever, initially going in, what the total lifetime value of a customer/client and or patient, is actually worth to their bottom line!(Or is generally suppose to be worth!)

And as a direct result, they have virtually no idea, what they can safely afford to spend, in order to acquire that all important first time customer, patient and or client etc.

So Why Is It So Critically Important That Extremely Savvy Entrepreneurs Know What Their True Cost To Acquire A First Time Customer Is?

So normally, here’s where the (all too typical) newbie startup/entrepreneur, completely goes off the rails!And then some.

They know they want and definitely need those all important, first time customers, patients and or clients etc.

And if they happen to be, (initially) flush with a little cash,(especially) if they’ll be initially trying to market their products or services online.

Your Semi Resourced Challenged Small business And Or Service Doesn’t Have To Spend Large In Order To Become Successful!

They may decide to start with some fancy, PPC (Pay Per Click) advertising campaigns.Then they may decide to include some (potentially expensive) “solo ads”, and finally, a few banner and or rather pricey offline display ads etc.

But here’s the thing and where they, (all too) often, temporarily get caught up and miss the boat entirely!

While they’re busy writing these checks, they literally have no clue, whether they can actually afford to do so or not!Huh?

Savvy Entrepreneurs At Least Have A Ball Park Idea Of What A First Time Customer And Or Client Is Actually Worth To Them!(Before They Ever Spend A Dime On Any Type Of Conventional Front End Advertising Campaigns!)

Case in point: Let’s take an offline hair or nail salon business.And let’s say the owner(s) currently have a single location, and their ideal customer/clientele, comes in about eight times per year.

Roughly, about once every six weeks or so, and they (typically) spend a bout $75 (or X amount of) dollars, for a wash, trim, tuck and get their nails done.

And the hair dresser, typically nets 60% or $45 dollars, per visit.($75 dollars x.60% =$45 dollars in initial front end gross profits.)

Which means, more than likely, they most definitely have huge untapped, back end income producing multi faceted opportunities.

Are You Finally Starting To  Fully Appreciate The Potential Long Term Profits Currently Buried In Your Semi Cash Strapped Small Business And Or Service?

And this ideal customer, typically last for seven years,(give or take), before they either, move on to an entirely new hair dresser/nail salon provider and or they dramatically decrease the frequency of their yearly visits!

But let’s have a closer look at the ongoing math, (which is) merely hypothetical for marketing illustration purposes only!

A $45 dollar gross profit x 8 yearly visits per year, equals an initial yearly gross front end profit per customer of $360  dollars. ($45 dollars per visit x 8 visits per year = $360 dollars, in gross front end profits per year.)

And times $360 dollar gross profit per year x 7 years = a total lifetime customer value of $2,520 dollars.)

Are You Starting To Develop An Entirely Different Perspective About Your Long Term Lead Generation Potential!

Now then, based on those hypothetical numbers.

Does it now make any type of economic sense, for a really smart and extremely savvy hair or nail salon owner, to offer any “brand new’ first time customer, that comes to the shop during the month of November, a grocery store coupon for $25 dollars,( or X) to purchase a turkey, (and or) groceries for the coming holiday meal. 😎 Say yes!

And based on their annual gross front end profit of $360 dollars.

Could they also easily afford to ethically bribe current, loyal repeat customers, with a $50 dollar gas card, for giving at least five of their closest, friends, relatives, colleagues and or co- workers, (an extremely time sensitive), brand new customer only, VIP 25% – 40% off their very first visit, discount coupon!

Whose Says Effective Lead Generation Strategies And Or Tactics Have To Be Outrageously Expensive And Or Complicated!

More than likely, the answer is a resounding yes!Especially if their numbers tell them, at least 30% of those individuals, that actually bother to redeem the gift certificates, will probably become long term repeat customers, that will typically stick around for the next five to seven years!  😀

(And at current gross -front end,- total lifetime customer values of $2,520 each!Ten new referral customers will add an additional $25,200 dollars to your bottom line, over the next five to seven years!

Give or take!(10 new long term repeat customers x $2,520 each= $25,200 dollars over their lifetime patronage to your business and or service!)

(Important note: Don’t get caught up on the actual numbers!It’s the overall marketing concepts you definitely need to grasp!)

Retaining Long Term Customers Or Clients Is A Whole Easier When You Know Going In What That All Important First Time Customer And Or Patient Is Truly Worth!

Some more, most less!Or can they safely afford to send their best, (repeat) customers, flowers on , (either) their birthday and or wedding anniversary each year!

Again, based on their gross profit, (both) per year and over the lifetime of the customers patronage, it definitely makes economic sense to do so, does it not?

So here’ a quick question for you. Does it make more economic sense, to simply write checks up front and (hope) and pray, that you’ll eventually generate enough up front end gross profits, to cover the ongoing expense!

Are You Starting To Appreciate How Some Little Things Help Savvy Entrepreneurs Accomplish Much Bigger Things!

Or to do a few, incredibly simple calculations, so you at least, have a general idea going in, “what” the true value of a that all important, “first time customer”, patient and or client, is actually worth to your business and or service over the long haul?

Which approach do you think will serve you best? And now does it make far more sense to you, why extremely savvy entrepreneurs, (such as yourself), definitely need to know, what the true cost of a first time customer is? Any questions?

Now as is customary during this part of our show.

Please share your extremely valuable comments (in the comments section below) that you can apply to your business, product or service in the next 30 days or less!

As always, if you got any value out of this post, please Google Plus or tweet this.Thanks!

And be sure you grab your explosive free 22 step small business marketing idea kit series, because it will help you increase your profits by as much as 25% in the next 90 days or less.

And help you master your effective communication in marketing skills.(No matter what your particular niche market is.)It’s a $97 dollar value and it’s free!

12 Responses to Why It’s Critically Important Savvy Entrepreneurs Know The Real Cost To Acquire A Customer!
  1. Hey Mark,

    This makes total sense here!

    I’ve made this mistake of using PPC and solo ads without how much would each customer cost me.

    I ended up paying more than what I should which I’m still paying for now.

    It’s important to know the habit of your target market and to be smart about it! If you can get to the point to be able to lose money and still win in the long run as Kim said, then you’re definitely doing something right!

    Thanks for sharing Mark and I hope you have a Happy Holidays!
    Sherman Smith recently posted…My Top 6 Posts For October and NovemberMy Profile

  2. Hi Mark,

    Very interesting. I am not a number kind of person, but this makes sense, and I can see how running numbers can help us actually see what can happen.

    Very good tool to keep on the side and use next time we need to figure this out for our own business.

    Will share,
    ~Sylviane
    Sylviane Nuccio recently posted…How To Become A Great Guest Blogger That Gets ResultsMy Profile

    • Awesome Sylviane!

      And coming from an experienced business owner/entrepreneur,
      I definitely take it a compliment!

      Thanks a bunch!Ya, it definitely helps, to have (at least) a general
      idea of what you can and cannot safely afford to try and acquire
      that all important, first time customer and or client etc.

      Otherwise, you start writing checks and even though you’re consistently
      doing business, you’re still not actually earning a profit!LOL!

      And you can’t quite understand why?Thanks so much for stopping by
      and sharing your extremely valuable thoughts!

      I definitely appreciate it!
      Mark Newsome recently posted…Why It’s Critically Important Savvy Entrepreneurs Know The Real Cost To Acquire A Customer!Part TwoMy Profile

  3. Mark, so inspirational and to the point.

    May this bring a close to all the hype out there. The best way to allow awareness of you and what is being offered. The :Word Of Mouth” marketing. Natural and very powerful. In fact, it is like a virus with the right people. They, create a natual buzy which leaves a vast echo.

    Mark you have laid out a great affordable thing here. Sharing your gratitude for those who are your current clients/customers. Making sure they feel your appreciation with an act of kindness. Not waiting for special milestones in their lives. That is the beauty of being graces to those who keep you in business.

    Those Joint Ventures are to risky. There are only a hand full of us. Who, have made it work for the best. Based on the project that was a common passion. That is the only way it will work. Putting your whole into it. That is passion and faith.

  4. Hi Mark,

    I’ve heard about how it works to build your list for long term and the value of each customer and how important it is to nurture each person but seeing it explained as you have, makes it all so much clearer than before.

    Thanks for the lesson this evening.
    Monna Ellithorpe recently posted…May I Have Your Permission?My Profile

  5. Hi Mark,

    I can be honest that I had no clue about it this. I learned that long term customers are ideal. You have the potential to make more (and stay in business) from repeat customers versus several different one-off customers.

    This is probably one of the first things entrepreneurs should learn.

    ~Lea
    Lea Bullen recently posted…Are You Feeding Yourself This Bologna???My Profile

  6. Hi Mark,

    Another super practical post from you!

    Lifetime Value of a Customer is a real important metric. As you say, when we know it we then know how much money we can spend on acquiring a client.

    As you have shown, we can even lose money on the first sale and still end up in a good situation. We KNOW that ultimately we’ll make handsome profits, as sure as night follows day.

    Knowing our LTV is a real game changer for sure. It completely changes our attitude about spending money on ads etc. Indeed, business owners will cease to think of advertising as a cost, but view it as an investment instead. It merely becomes a return on investment (ROI) excercise. When that happens, fear is removed, and our reptile like brains move towards an enlightened approach to growing our businesses.

    Thanks again Mark!

    Kim
    Kim Willis recently posted…6 Ways Your Website Can Generate More Leads and Sell Up a StormMy Profile


[top]

Leave a Reply

Your email address will not be published. Required fields are marked *

CommentLuv badge

Social Share Buttons and Icons powered by Ultimatelysocial