New customers are for sale.  If you want to grow your business quickly, it is usually a question of money.  To illustrate this, imagine if you were given $1,000,000 and told you could only use it for marketing.  Do you think you could grow your business?  There are really only TWO things to keep in mind when paying for growth.

First of all, how much does each new customer purchase cost you?  This is without a doubt the most important question in marketing.  If you send out 10,000 post card
s at a cost of $3,000 and you get a 0.5% response rate with 50 new customers coming into your business to spend money, you paid $3,000 / 50 = $60 per customer.

Secondly, what is the value of a customer to your business?  Much of this has to do with the way you operate your business.  A good marketing campaign can get people to http://www.dreamstime.com/royalty-free-stock-images-business-growth-graph-image28880209your business but only a well run business and a great experience can get them to come back.

For most small businesses I recommend looking at one year, per customer profit as a starting point.  If you have a good point of sale system that is tracking your customer interactions, you can simply run a report showing how many times per year your customers visit your business, how much they spend in one year and then multiply that by your profit margin to see how much they are worth.

If most of your customers come once per month and spend $20, that means they spend $240 per year and if you run a 20% profit margin, you will make about $48 on each new customer.  So, in this case, the post card mailer mentioned above would not be a great investment for you, because even one year after the campaign, you would still not have broken even since you would have paid $60 for each customer and you would have received only $48 in profit.

Monday, I am going to give you 5 tips to increase your marketing ROI, so start thinking today about various marketing efforts you have done and how they worked out for you.  What has been your most effective campaign so far?  How many new customers did you get from this effort?

Have a great day!

James Shepherd

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