If I told you that you could spend $100 and get a customer worth $10,000 – wouldn’t you be interested? Why are so many businesses unsure what a customer is worth to them? Instead of knowing these numbers with precision, most business shrug and say I don’t know. How are you fishing for new customers?
Hooking the Right Clients
Marketing is like fishing. You are going to spend some money to try and hook a few folks. You might entice them with bait (a free offer, discount, education, donations, etc.) But you want to connect with these new individuals so you can sell goods and services over time. But if you don’t know their value, how do you measure if your marketing is working?
Hook, Line & Sinker Accountants
An accountancy firm I helped wanted to attract more clients. When we talked, they didn’t know what a client was worth over time. They spent money on many different marketing activities without measuring their results. It was surprising, but this firm is in the numbers business – yet they didn’t think that applied to them.
We sorted through their list of clients and arrived at three main segments. Individuals, Corporations, and One-off needs. They found that individuals, on average, stayed with them for 6.5 years. Corporations for four years and one-off clients less than 18 months. When they looked at the revenue from each segment, it was clear that corporations provided the most revenue over a lifetime almost $50,000. Individuals were only worth $6,500, and one-off clients were worth about $10,000.
We determined that we would focus on growing their corporate business. And, since an average client was worth $50,000 over their 6.5 years with them, they were will to spend $5,000 per new client.
We created a marketing campaign that cost them $50,000 over the course of one-year.
They agreed with my math equation that if we could bring in 10 new clients, that would cost $5,000 per client, they would be happy.
With this framework, we put together our tactics.
Customer Acquisition Costs
No matter what business you are in, it is critical that you know the value of your most treasured customers and to figure out what it would be worth to acquire them?
Being strategic with your marketing means starting with the numbers. How do you segment your customers? What is the average length of time they work with you? How much income do you derive from each segment and at what type of margin? What are you willing to spend to get each new customer?
Once you know this information, the work is to solve for X in your equation.
Begin with the numbers, put a worm on your hook and reel in some new fish.
Could you use some help putting a worm on your fishing rod? Don’t ask me for help. But if you want to attract more customers, I can help you with your marketing efforts. Call me at 919 720 0995 or email me at jeffslater@themarketingsage.com
Photo credit: Photo by Taylor Grote on Unsplash
