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

So as you previously discovered in part one of this ongoing series, it’s critically important, that extremely savvy entrepreneurs(such as yourself), have to, at least have a general idea going in, “what” their ideal customer, client and or patient is worth to their business and or service.

Otherwise, you dramatically increase the likelihood, you’ll spend and or invest, far more than you probably should, in order to acquire, (and or) generate, that all important very first customer, client and or patient.

(It happens all the time!)

Because remember, typically your average newbie entrepreneur, be they a small to midsize business owner and or self employed service provider.

They typically spend about 400-500% retail cost, (unintentionally) to acquire, (and or) create that all important very first customer/patient and or client.

And typically, about 80-90% of that very first sale or two, just depending on the amount the first time customer/client patient initially spends. It’s typically all front end cost to the business owner/service provider.

And the remaining balance, (if there is any), is typically their initial gross-front end- profit.In part two, let’s slightly adjust your marketing perspective and offer you, yet another proven way to help you, (not only) see, but hopefully appreciate the value of understanding, “what” it initially cost, to acquire a brand new first time customer and or client/patient etc.

So Why Do Some Extremely Savvy Entrepreneurs Make It Their Mission To Know What It Really Cost To Acquire That All Important First Time Customer And Or Client?

Case in point:Let’s say you are one of the smaller, (local) real estate developers in your area, and the area is steadily experiencing more and more growth.

There’s a rapidly expanding bio tech community and a couple of major hospitals and engineering plants are being built, with several more slated to be built in the next five years or so.

So the demand for brand new single family-starter- homes has risen sharply.And with all this extremely rapid growth in the various industries, the demand caused by all the influx of brand new workers and relocation of workers and recently employed engineering employees etc.

Your business has unexpectedly taken off in a big way!Major congrats BTW! 😎 So without you really stopping to consider your total hard cost, based on your current gross profit margins, to (either) build a brand new starter home and or sufficiently rehab an existing one.

You immediately go about enthusiastically advertising, in practically any and every local publication, you (and your) part time book keeper suspect, potential new/first time home buyers might be reading!

If You Don’t Consistently Monitor And Adjust Your Marketing Strategies Your Semi Cash Strapped Small Business And Or Service Can Quickly End Up Under Water!

And the net result is; between the outrageously expensive, Sunday newspaper display ads, the full and half a page display ads in some of the (extremely popular), local real estate magazines etc.

And let’s not forget the local pennysaver, full and half page display ad etc. 😎

Once you, (and your book keeper), bother to actually total all of your (staggering) ongoing monthly advertising cost, you quickly discover, (much to your amazement),you’re easily spending (somewhere) around $11,000 dollars,(give or take) to generate an actual buyer!(Some five to eleven months later!)

And it works out to about $1,571 dollars per actual lead, (CPL) -Cost Per Lead to be exact!Say what? Yep!

Savvy Entrepreneurs Leverage Real World Situations To Better Overall Efficiency!

You see, with all your massive, steady exposure to the general public through your traditional advertising mediums,you might actually be generating about 25 calls (inquiries) per month.

(Hypothetically speaking of course!)And your secretary, (or whomever) you actually have answering your business phone number, during your standard business hours of, M-Sat, 9 am -7 pm.

They manage to consistently set 15 actual, (scheduled) weekly appointments,which represents an impressive 60% appointment setting ratio!Which is pretty darn good! (15/25=.60% appointment setting ratio.)

But after several years of being in the business trenches, (both you) and your secretary know only too well, (at best) you can tentatively count on 50%, or only half of them actually showing up and keeping their initial appointment.

Your Lead Generation Efforts Can Either Open And Or Close Doors To Long Term Opportunities!

And that’s after some of your best, most rigorous, (professional) follow up efforts, with the original no shows!

So if, (from start to finish), seven potential prospects, actually keep their appointments and eventually, (at least) one of them, goes on to actually purchase, either one of your brand new -starter- homes, and or one of your newly rehabbed single family homes.

If you  divide your overall $11,000 dollar advertising/marketing cost per month, by seven real prospects per week, you get a (CPL) of roughly $1,571 dollars per lead.($11,000 divided by 7 =$1,571 dollar per lead, per week, give or take.)

And since your gross profit margins are pretty good, as long as there is no major downturn in your local economy, and the local advertising rates don’t rise too much, you can definitely afford to stay in business,right?

Ever Notice How Some Of Your Best Marketing Strategies Don’t Necessarily Start Out That Way!

Here’s where understanding what your total cost are, could really potentially benefit you. Let’s say this extremely savvy builder, (whose also) a dues paying member of a couple of the -local-apartment rental associations in town.

(Which means he regularly attends their monthly meetings and frequently reads their monthly online newsletter as well.)

They approach a few of the large commercial apartment building owners, that currently have residential units with, (anywhere) from 10- 40 apartments in them.

They ask the owners to (once a month) place their flyers under the doors of their tenants and for every tenant that actually ends of buying one of the builders homes.

Successful Entrepreneurs Know How To Leverage Opportunity!

The builder will gladly reimburse the apartment owner one month’s rent, via a certified cashiers check, for a maximum of $1,500 dollars!

(Hopefully you can appreciate “why” he’s not currently willing to go above $1,500 dollars per lead, correct?  😎 )

Plus, since this extremely savvy builder routinely collects the email address of his inquiries, so he can send them monthly , (and or) periodic updates of some kind,on the current inventory they have in stock!

And, they inform all their inquires,(who are current email subscribers only), when they purchase any home from the developer, the developer will automatically pay up to $1,500 dollars of their traditional closing costs!(The particulars will be adequately spelled out in the final agreement!)

Have You Ever Noticed How Some Of Your Very Best Marketing Strategies Have More To Do With Power Networking!

But here’s what else they offer the apartment association landlords, in exchange for them passing out the builders flyers to their tenants each month, and or once every 90 days.

The builder will gladly send an email to their subscribers, advertising any current vacancies the apartment owners may currently have!Think about this added benefit to the apartment owners for just a second!

Savvy Entrepreneurs Embrace Opportunity As Often As They Create It!(Don’t You Agree?)

Take a look at the builders numbers for just a second. They average about 25 semi to legit inquires per week, right?

And of those, about twenty of them actually whined up going over to builders mobile responsive, WordPress website, and joining their opt in email list, in order receive the (promised), periodic updates and their chance to save up to $1,500 dollars on their standard closing cost, should they purchase any advertised home from the builder.

And as we previously mentioned, only (a little more) than half of those scheduled appointments, will actually show. but every week, the builder averages about twenty brand new opt in subscribers per week.

So over the course of 52 weeks per year, that equates to a grand total of 1,040 brand new opt in subscribers per year.(52 weeks per year x 20 brand new opt in subscribers per week = 1,040 total new subscribers per year.)

And let’s just say their is a fallout (un-subscriber rate) of 15%, or (said another way), an 85% annual subscriber retention rate.

So about 884 subscribers  per year, remain active subscribers and at least 30% of them routinely open and read your email and click on your links etc.(1,040 x .85% annual retention rate = 884 annual opt in subscribers.)

It’s A Whole Easier To Retain Customers When You Know What You Can Actually Afford To Generate Them In The First Place!(Right?)

The main point is, that apartment association member/apartment owner, will also be getting periodic free advertising from you as well, whenever they have any vacancies to fill! On top of whatever free or paid advertising they’re currently doing!

Just for passing out you flyers to their tenants, either once a month or once every 90 days or so! Can you see “how” understanding “what” their customers cost them, can allow them to enter into such a fairly sophisticated arrangement in the first place?

Are You Starting To Appreciate How Your Resourced Challenged Small Business And Or Service Can And Definitely Should Become More Service Orientated!

And is it now starting to become crystal clear, why extremely savvy entrepreneurs, make it priority one, to know what their true cost, to acquire and or create a new customer/patient and or client 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!

2 Responses to Why It’s Critically Important Savvy Entrepreneurs Know The Real Cost To Acquire A Customer!Part Two
  1. Those are some intriguing and scary numbers you’ve shared above. Yet, you’re telling it like it is. I was reading another post this week where the writer was telling us how much money she spends in advertising. She knows how much she has to spend to get at least one client who will eventually pay her more than 5x the cost of marketing and advertising. In essence, it’s recognizing not only that one has to spend money to advertise, but needs to be ready to charge more, as in what you’re worth, once you land that one person you’re looking for who fits your client model.

    Great stuff! BTW, looks like your CommentLuv isn’t working… 🙂


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