How Much Should I Spend to Get a New Customer?

A common question posed to me is: “How much should I be willing to spend (or invest) to get a new customer (or client)?” This question is closely related to another common one about how to set an appropriate ongoing marketing budget.

It becomes much simpler to decide how much to invest to get and keep clients when we know how much money each of those clients means to our bottom line. If, over the course of a client’s lifetime with us, we’ll profit $100 from him, it doesn’t make much sense to invest $150 to get him. While this may sound obvious, it’s surprising how many business owners merrily go along their way having no idea what their company’s average lifetime value of a client (LTV) is. Knowing this number will go a long way to helping us determine the answer to the question posed above.

The determine LTV, follow this simple equation:

Average Transaction $
x Average # Transactions/Client/Year
x # Years of Average Client Activity
_______________________________
= Gross Lifetime Revenues
x Profit Margin
_______________________________
= Lifetime Value of a Client (LTV)

You’ll note my version of LTV is a bit different from other explanations you may have seen. Most end before multiplying the Gross Lifetime Revenues by the company’s average Profit Margin. To me it makes no sense to look only at revenues since profit margins vary so much between companies. In the end it’s all about profits, right? If this is true, LTV needs to be based on profits, not revenues.

Now you can look at the profit you’ll enjoy from a client, on average, over their lifetime as well as during any given year. Armed with this information, you can now make a much more educated decision as to what you are willing to invest to get and keep that new client.

Bryan Waldon Pope

The Butterfly Effect in Marketing

The Butterfly Effect suggests that small variations in the initial condition of a dynamic system may result in vastly differing outcomes over time. I won’t go into the history of the coining of the term, but suffice it to say that one notion of The Butterfly Effect is that when a butterfly flaps its wings in one part of the world, it affects the behavior of weather far away in another part of the world.

This principle can be applied in just about any facet of life. It is very applicable when we talk about marketing. Today I’d like to share just three ways The Butterfly Effect may apply to our marketing efforts:

1. Small amounts of time and effort spent consistently can produce dramatic results. Many business owners with whom I work are the marketing decision-maker for their businesses. They don’t have a full-time marketing director, manager, or even assistant. Especially in such cases we see the most significant proof of this concept. Spending 30-60 minutes a day or a half-day a week consistently on marketing efforts can pay off in a big way.

One such example was a two-person business who, after listening to me speak, decided to distribute flyers for one-half day each week. They began immediately, and within a few weeks they were in the best financial position they had been since opening their doors.

2. The smallest act of kindness toward a client can bring back a tidal wave of business. Sometimes going the extra mile with a client increases the loyalty of that client, but doesn’t go any further (which isn’t a bad thing – we’ve still won in that case). But occasionally, a particularly satisfied client becomes an avid promoter for the business that went above and beyond.

In today’s digital society, good news can travel faster than ever. It’s easy for people to share their positive experiences with others, including businesses. Making these “acts of kindness” part of our companies’ cultures and daily operations can have a monumental effect on our success. Think “Zappos.”

3. A seemingly insignificant oversight or error can come back to bury your company. I’ve noted two positive ways The Butterfly Effect can bring greater success to your company through relatively small marketing efforts. Here’s one on the other side of the fence.

I once worked with a company that had a customer complaint come back to them about how they had been served. The complaint was unfounded by any reasonable person’s judgment. The company told the customer nothing would be done to rectify the situation. And, based on my understanding of the situation, they had no reason to. The customer was dead wrong. Unfortunately, the customer took legal action and the judge saw things differently. The event resulted in the company’s demise. They filed bankruptcy and closed their doors. The saddest part of the story is this: for a day’s time on the part of one of the principals and two or three thousand dollars, the whole situation could have been averted. A significant investment, you say? It seemed so on the front end. After all, the customer was wrong. Period. But in the end, it would have been a very inexpensive fix. Hind sight is 20/20.

What other Butterfly Effect scenarios do you potentially see in your marketing? What small efforts can result in significantly different outcomes for you and your business? Please share your thoughts.

Here’s to your marketing success!

Bryan Waldon Pope

How Competent Are You as a Marketer?

In the 1940s, psychologist Abraham Maslow gave us The Four Stages of Learning. It’s an eye-opening framework used to determine one’s competence level in just about any area of life. Once you know where you’re at, you can create meaningful action steps to get to the next level. I’d like to apply Maslow’s insights to the world of marketing.

Stage 1: Unconscious Incompetence--you don’t even know that you don’t know something. This is the most dangerous of places to be with regard to marketing if you’re a business owner or other person responsible for making business happen for your company. Don’t assume you’ve got things figured out. Open your eyes and your mind to what’s going on around you and discover marketing issues, trends, and techniques of which you’re currently unaware. The Unconscious Incompetent does not last long in business.

Stage 2: Conscious Incompetence--you know you lack information and experience. This is a much better place to be than Stage 1, although it still doesn’t immediately benefit your business. You realize you lack marketing skills, education, and experience. Hopefully you’re willing to consistently invest time and energy to move to the next level. Awareness is good, but action must follow.

Stage 3: Conscious Competence--you know how to market your business, but it’s accomplished with a significant exertion of effort. It takes too much time. Efficiencies are lacking that would bring greater results with less investment of resources. Marketing is still something you probably don’t truly enjoy. It’s still a necessary evil.

Stage 4: Unconscious Competence--marketing has become part of who you are and how you do business. Let me note that I’m not a total believer in Maslow’s use of the term “unconscious” in this stage. I’d rather consider this stage “Automatic Competence.” The Automatic Competent marketer consistently enjoys a solid return-on-investment on marketing activities. Marketing is not something that is “done” from time to time; it’s an integral component of daily business. The company is a marketing company first--and it shows in both revenues and profits.

What stage are you at right now as a marketer? What do you need to do to progress to the next level? How will making that effort pay off for you and your company?

Share your thoughts, ideas, and questions below. Let’s take you to the next stage in becoming automatic in your marketing activities.

Here’s to your marketing success!

Bryan Waldon Pope

3 Fast Ways to Increase Revenues NOW (Method 3 of 3)

So far we’ve talked about holding an event and sending a special offer to existing contacts as two ways to quickly increase revenues. Today I’m going to share perhaps the fastest way I’ve seen to boost sales over my 20+ years of marketing.

Method #3: Create a Cross-Promotion

Cross-promotions are fast and effective because 1.) they make use of your greatest asset—your existing client base, and 2.) they leverage others’ client bases as well.

In its simplest form, a cross-promotion is simply a promotion in which two parties make offers to their audiences with a freebie attached from another party. A restaurant and a dry cleaner can run a cross-promotion. Each gives gift certificates to their clients for the other’s business. This works for service providers, retailers, internet-based businesses, wholesalers, and just about anyone else you can think of. A car wash can give a free oil change away with the purchase of a five-pass carwash book, while the oil change shop can give away gift certificates for a free upgrade to a super-wash at the car wash. The possibilities are endless.

Two important points to remember: 1.) Your cross-promo partners reflect on your company. Choose carefully! 2.) Gift certificates work much, much better than coupons. Don’t make the cross-promo a dollar-off deal, make it free or value-added offer.

Cross-promos can be created and launched in a matter of a few hours of work. They instantly tap others’ audiences for the benefit of your company. They make both (or all) partners in the cross-promotion look good because they add value all the way around and create client loyalty.

Get your team together. Identify five cross-promo opportunities your company has right now. Don’t have a team? Brain block on cross-promo opportunities? Need more direction? No problem! Ask your questions below and let's get your cross-promos going RIGHT NOW!

Here’s to your marketing success!

Bryan Waldon Pope

2 Mistakes That Killed the Punch in This Promotion

I just received an email from a vendor I've used a number of times in the past offering me "exclusive pricing" on some of their products. Interested in what I may have qualified for as a client, I read on. That's when I hit the first HUGE mistake made in this promotion.

As I would hope, there was a deadline on this "exclusive pricing" which, in theory, should make me feel some urgency to place an order. But immediately following the expiration date notice was a statement that indicated a new "exclusive pricing" offer would be sent to me when that one expired.

WHAT?

That took the urgency right out of the picture. Apparently I can order any time I want and get a deal. No rush, right?

Then the thought hit me: If this blatant a blunder was made in this promotion, is my "exclusive pricing" even really exclusive? So I went to the company's website. Yep...you guessed it. My "exclusive pricing" is posted right on their website for anyone who happens by. And I thought I was special.

When we run promotions, we must be sincere. We need to create real urgency. We must make genuine deals to our audiences that really are whatever they are purported to be. Running a promotion right can bring a windfall of sales. Blunders like those I've shared from this company's train wreck of a promotion can cause permanent apathy--a marketers worst enemy.

Remember the boy who cried wolf? You don't want to be him. Especially when it comes to your marketing.

Here's to your marketing success!

Bryan Waldon Pope

3 Fast Ways to Increase Revenues NOW! (Method 2 of 3)

In my last installment on this topic, I discussed holding an open house, seminar, or other event as a fast way to increase revenues. Today’s method is even quicker.

Method #2: Send a Special Offer to Existing Contacts

Most businesses have contact records for past clients, current clients, and prospects. If you don’t, your assignment is to devise a way to begin capturing such data and never (never, never) let a client or prospect interact with you again without obtaining his or her contact information--at least in its simplest form.

On that note, I once served a retail store owner who was struggling and had not captured any data on the company’s customers. The first thing we did was create an offer to make to each person who entered the store in exchange for his or her information so special VIP client deals could be personally extended to them. Within a week or two, the idle store clerks were making calls to these people informing them of a special offer in a brief, 20- or 30-second phone call, allowing them to easily break from their calls when clients entered the store. Within a few months, sales were strong and the company was out of trouble.

The five most popular ways to extend special offers to contacts are:

:: in person
:: by phone
:: by direct mail
:: by email or text
:: through social media.

Email, text, and social media have become particularly strong contenders as vehicles for carrying special offer messages due to their low cost and convenience. While this isn’t a bad thing, remember that they are low-cost and convenient for everyone, making them heavily used and, in some cases, less effective than other methods. Being a high-touch contender in an electronic world may serve you well. Consider all your possibilities carefully before deciding how you will extend your special offers.

So what is your special offer for your prospects? What about existing clients? How will you extend your offer to them? Gather your team, decide on the strategy behind your offer, develop the campaign, determine the best vehicle for your message, and execute.

I’ve increased clients’ top-line revenues by 20%, 50%, even 100% in as little as one month using this one technique. How will you employ it? Don’t just think about it. Do it today!

Here’s to your marketing success!

Bryan Waldon Pope

3 Fast Ways to Increase Revenues NOW! (Method 1 of 3)

Most of the people who talk with me about marketing are looking for a quick fix. I hate the see this because consistently engaging in effective marketing practices can go a long way to removing the need for these emergency blitzes. I certainly understand, however, that sometimes a business just needs a shot in the arm to get over a hump. Over my next three installments, I’m going to share three ways virtually any business can create an income boost that can bring in new money in as little as one day, but absolutely within 30 days.

Method #1: Hold an Open House, Seminar, or Other Event

Regardless of the type of business you have, you either have a place of business people can come to, valuable knowledge you can share with your audience, or both. This means you are a candidate for holding an open house to allow prospects to get to know you better, a live or tele-seminar to share your knowledge, or some other similar type of event that gets you noticed.

:: Decide what type of event you are going to hold. It doesn’t have to be fancy or over-the-top. It just needs to meet your audience’s needs.

:: Involve the media and your contacts in getting the word out. Sit down and look at all the places and people who can help you publicize your event. You have at least a few, including the local paper, online community calendars, vendors, and clients; but chances are good you have many more than that. Get your team involved and think through all the possibilities.

:: When you have your plan in place, launch your publicity campaign two to four weeks in advance of the event, depending on the time commitment your event requires on the part of an attendee. A drop-open house only needs a couple weeks’ advance notice, while a full-day seminar calls for four weeks. Remember, though, that most of your attendees won’t RSVP (if that is required) until a few days before the event. That’s just human nature.

:: Keep it simple, especially if you’re new to such an event. Let your fears go, make your plan, and DO IT! You’ll be surprised at how effective events can be in raising your profile, improving client and customer loyalty, and improving your top-line revenues.

Watch for my next two installments. They offer even quicker ways to bring in new money NOW.

Here’s to your marketing success!

Bryan Waldon Pope
Founder
Marketing Success Institute