The Value of a Customer
The Driver of All Marketing Efforts You need to determine what the value of a customer is to your company. Answer the following questions: How much will the average customer spend with you per year? A = _____________ If you provide quality service and products, how many years can you expect to keep a customer ? B = _____________ What is your gross profit, as a percentage of revenues? C = _____________ The value (V) of a customer is: V = A X B X C We learned with our network consulting company that the average life of a customer was about 2 ½ years and the average yearly expenditure was around $10,000. With a gross margin of 35%, each client was worth $8750 to the company. $10,000 X 2.5 * .35 = $8750 If you haven't used this simple formula before, it can totally change how you view customer acquisition, retention and customer service. Normally you'll want to spend about 10% of current or projected revenues on customer acquisition. This formula allows you to accurately project what a customer is worth to you over their customer life cycle. A valuable concept to learn and leverage is to go to great lengths to keep a good customer. The simplest and least intensive marketing efforts are those that you do for existing customers. Stay in contact, educate them on the excellent services you have provided them and the value proposition that you offer. Close Ratios The next important parameter is to calculate your close ratio. This means for every prospect you talk to, how many become customers? We had a close ratio of around 25%. With the above example, assuming a marketing budget of 10% of gross revenues per customer, we had $1500 to work with. With a 25% close ratio, that meant we could spend on average $375 for every prospect we talked to ($1500*.25=$375). This is a very useful tool for making decisions around how much time to spend on proposals, contact, lunches and other prospecting activities. Bryan Brandenburg has published 5 books as well as a number of articles both in print and on the internet. He has published almost 30 software programs both for consumers and business. More information can be found at www.vmmg.net
Related News
|
 |
|
|
RELATED ARTICLES
Create Free Internet Buzz with Your Workforce
There are many different ways to increase your traffic on the web. Just as there are get rich quick schemes, there are get traffic quick schemes. These can backfire on you just like any other shortcut to results.
Marketing Through Associations
©2004 Jeffrey Dobkin
Fertilizer For Your Grassroots Marketing
Looking for a great way to drive traffic to your business? No million dollar ad budget last time you checked? The solution may be to harness the power of grassroots marketing.
Wife?s Marketing Prowess Helped Edison See the Light
It is well known that Thomas Edison was an inventor, a genius, and he never slept. Did you know that Mrs. Edison was a genius and never slept too? She was the marketing guru behind his engineering success.
True, Tom had discovered what is today known as the light bulb. When he showed it to the Mrs. Mina Edison, his second wife, she asked "what are you going to call it?"
Build a Dynamic Business - 10 Steps to Start You Off
It's where your employees are in a 'special place' when they work together. And to get there, they have to be in a culture that is very special - and you can create it in your business too!Here are ten key points that will make a big, big difference:-
Build Great RelationshipsTake the time to engage with your people. Enjoy conversations with them. Listen more than you speak.
Be GenerousThis is not a money thing. Generous with your time, your courtesy, your behaviours. Be a kind boss and be humble.
Encourage PeopleEncouragement creates tremendous energy. Think about when you were encouraged - what was it that happened to you - replicate it a hundred times in the next week.
Make it SafeLet people fail gracefully - and not about catching them out. Be the net they fall into and help them experience and learn from their mistakes safely.
Trust and HonestyThese have to be a given for your people to give of their best for you. Setting the standards will encourage this as a baseline in your business.
Enable RiskSure, gamble a bit on opportunities and let your people do so too. Risk is where the great inventions have happened in history - let it happen now.
Give a HandYour people will value it when you get your hands dirty too. Take part in the 'business' when it needs you and be a part of the team sometimes.
Provide a MapHelp your people help you and your business, by having a game plan for the future for the business and the people who work there. Be open with them - share your hopes, fears, worries and elation.
Have ClarityBe very clear about what is expected of your people. Spell it out, go back, recheck and do it again. the onus is on you to get this right - not them.
Laugh!The best creator of teams and the spirit they need, yet so often lack. Have fun, encourage laughing and get in there yourself - it will make the most enormous difference for you!
With these conditions in place, you will then be able to leverage all the natural exuberance of your people - and get more, much more from them than you ever bargained for.
Tackle a Newsletter and Come Out On Top
Unlike any other marketing vehicle, newsletters give you the opportunity to contact your audience and convey your expertise in a way that offers value and information. Newsletters provide a reason -- and a structure -- to maintain ongoing contact. One of our clients has even said that recipients call if her newsletter is a few days late.
The 4 P s of Marketing: Effective Marketing Programs Depend On Them
There is no shortage of marketing programs, many with great profit potential. The challenge is to sift through and choose the ones that are right for your situation -- the ones that have the greatest potential to grow your business.
Marketing Lessons From TV?s The Apprentice
Can we actually learn a marketing lesson from reality TV? In the case of Donald Trump's "The Apprentice" I'd say we can.
Marketing Secrets #101- Your Most Important Sale
Which sale is the most important one you will ever get from a
client?
Five Tips for Trade Show Success on a Small Budget
No matter how small your marketing budget, your business can afford to have a successful presence at trade shows without incurring big expenses. Here are five tips for exhibiting in trade shows inexpensively:
Full Color Postcard Marketing: 7 Reasons Why They?ve Become the New Direct Mail
The most crucial aspect of having a high response rate to any direct mail marketing list is to keep your business' name in everyone's mind, constantly. But how do you do that without annoying your business customers, or divvying up a lot of time and money?
How To Go From Under Dog to Top Dog by Unleashing The Power Of a Postcard
The Tale of Two Dentists...
Ditch Coupons Before Customers Ditch You
Everyone wants to feel like they're getting a good deal. Merchants often attempt to capitalize on this desire through coupon offers, rebates, and "special discounts." Coupons have become the promotional drug of choice to woo more business from new and old customers alike. Unfortunately, coupons can destroy customer relationships almost as fast as they are made.
How Important is Your Marketing?
Bob called last week from Phoenix, Arizona with some stunning news about his web site. He first contacted me in the fall of 2003. He had a web site that was helping him generate a healthy income but he sensed he could be doing even better. He wanted to get more visitors to his web site and get more of them to contact him about his retail liquidation services.
Prepare Your Communications For Growth
As the American economy emerges from recession, many businesses are now reexamining their marketing materials and realizing that their communications are outdated, ill-prepared for the return of a robust, competitive, growing economic environment. Strategies developed to survive hard times are often the wrong ones for profiting in good times.
Measuring the Return on Your Direct Mail Investment
In direct mail lore, there's a rule stating that you can measure the success of your efforts by a minimum response rate of 1-2%. In other words, if you send out 10,000 pieces, you'll have a successful mailing if at least 100 recipients respond to your offer. (One percent of 10,000 is 100.)That's one view of direct mailing success. Permit me to offer a different perspective: one from the small business world. Specifically, I'm referring to those small business people who work by and for themselves. Call them "One-Man Bands," "Working Soloists," "Free Agents," or whatever you'd like.To help you remember these two perspectives, let's give them a couple of catchy names:1. The "Playing the Percentages" Perspective. This is the "industry standard 1-2% response rate on your mailings" perspective you've heard so much about. This is the yardstick favored by businesses that are sending large quantities of direct mail to sell mass market products.For example, if I own a pizza parlor, and I'm doing a "use this card for 10% off on your next order" mailing to all residences within a three-mile radius of my business, I might have a mailing list of 10,000 names. You'd better believe that I'm going to watch the overall response rate like a hawk, and I'm going to be looking at precisely where those hungry customers are coming from. If most of them are coming from a handful of apartment complexes next to a college campus, I'll know to send my future mailings to those complexes. 2. The "You Only Need A Few" Perspective. This is the one for those One-Man (or One-Woman) Bands who are selling services that take a fair amount of time to provide. Like marketing consulting, public relations services, graphic design, or customized computer software applications. For these folks, a handful of new or repeat clients from a promotional mailing is quite enough. After all, as the owner of a one-woman graphic design studio told me once, "I don't want to be a victim of my own [direct mail] success."
How to Turn Your Promotional Products Expense Into a Profit Center
If you use promotional products you probably already know the power of giving away freebies. You may use them to thank current customers, or to give incentives to potential customers.
How to Handle Jargon at Your Web Site - and Why
If you sell a technical product or service, you probably
know you have jargon at your web site - specialized
terminology that the average person doesn't understand.
While jargon does help you communicate precisely with
peers, it seriously gets in the way if potential and actual
customers aren't as conversant with it as you are.
What You Must Know When Marketing Your Business
Marketing is both an art and a science. Anyone who says differently probably isn't doing very well marketing his or her business. On the art side, intuition definitely plays into the equation. On the science side, it is about systems, strategies and plans. Outlined below are some areas of consideration when you decide to market your business.
D.A.N.C.E. With Me
Recently, a client asked what he could do to help my business, but I wasn't ready with the answer. A lot of us probably miss these opportunities because we don't think through what we need and how to respond when someone offers to help promote us.
|
