(770) 318-8975
info@actioncoachatlanta.com

Simplify Your Marketing Decisions

Ever wonder which marketing strategy you should undertake to supercharge your lead generation efforts? Imagine how much easier that decision would be if you had tracked the results from prior efforts. If you know your average cost to acquire a new client, would that make your decision easier? You bet it would. So let’s spend a few minutes highlighting a couple key metrics you need to know about your marketing.

When developing marketing campaigns, it’s important to recognize the difference between Customer Acquisition Costs and Lifetime Value. The former is simply your cost to acquire a new customer. For example, if you spend $1,000 on a direct mail campaign that results in 10 new customers, then your Acquisition Cost for that campaign is $100.

The tendency is to decide whether to embark on a campaign based on the amount of the marketing campaign rather than looking at the outcome of that investment, based on past experience. Most business owners don’t measure the results of specific marketing campaigns so they are not able to identify their Acquisition Cost across all of their marketing efforts. If they did, deciding which campaign to use becomes easier…which has the lowest Acquisition Cost.

There are two kinds of acquisition costs.

  1. Allowable Acquisition cost is the amount a business can spend to acquire a new customer based on only their first purchase. In other words, the cost of acquiring the customer is less than the profit made on your first sale. Using this number allows a business the possibility of unlimited growth…why wouldn’t you continue investing in marketing if your profit from the new customers exceeded the cost of the campaign?
  2. Investment Acquisition cost is when the profit from the first sale to a new customer is less than the cost to acquire that new customer. However, over time the accumulated profits from that customer exceed the cost to acquire that customer. Some companies can afford to use Investment Acquisition strategy, because they have the resources to absorb the costs.

Either strategy can be effective depending, on the financial condition of the business. For a business with a tight cashflow, investment acquisition cost strategies can wreck financial havoc on the business.

Regardless of which acquisition cost strategy you use, it’s important to know your Lifetime Value – the value of your average customer over the average tenure. When calculating Lifetime Value consider:

  • the number of times the typical customer buys from you
  • what is the average amount spent on a typical transaction
  • how many referrals does the average customer generate
  • how many of those referrals become buying customers

Knowing your average Lifetime Value of a customer allows you to make more informed marketing decisions. Would you spend money on a marketing campaign that has a $350 Acquisition Cost knowing that on average your clients generate profits of $5,250 from using your services or buying your products?

If you haven’t been tracking the results from your marketing campaigns, begin immediately asking new customers how they heard about your business. If you need help developing the other key metrics we have discussed, reach out to me.

 

7 Comments

  1. May 12, 2015 at 9:06 am

    Thank you for another great article. Where else could anybody
    get that kind of info in such an ideal manner of writing?
    I’ve a presentation next week, and I am on the search
    for such info.

  2. Hi there! I could have sworn I’ve visited this website before but after browsing through many of the articles
    I realized it’s new to me. Nonetheless, I’m definitely delighted I stumbled upon it and I’ll
    be book-marking it and checking back often!

  3. May 15, 2015 at 7:21 pm

    I am really inspired along with your writing abilities as neatly as with the layout on your blog.
    Is that this a paid subject matter or did you customize it your self?
    Either way keep up the excellent quality writing, it’s rare to see a
    nice blog like this one these days..

  4. May 17, 2015 at 5:30 am

    My brother suggested I may like this blog. He was once totally right.
    This post actually made my day. You can not consider simply how a lot time I had spent for this information!
    Thank you!

  5. May 18, 2015 at 9:29 pm

    you’re in point of fact a excellent webmaster. The website
    loading pace is amazing. It kind of feels that you are doing any unique trick.
    Moreover, The contents are masterpiece. you’ve done a wonderful job on this matter!

  6. May 19, 2015 at 3:33 pm

    Very great post. I just stumbled upon your weblog
    and wanted to say that I have really enjoyed browsing your blog posts.
    After all I will be subscribing for your rss feed and I hope you write once more very soon!

  7. May 21, 2015 at 4:58 am

    Hi i am kavin, its my first occasion to commenting anywhere, when i read this piece of writing i thought i could also make
    comment due to this brilliant piece of writing.

Leave A Comment