How Much Does a Customer Cost?

Attracting new and retaining new customers will be the lifeblood of your business growth. Ever wondered how much a customer actually costs your business?

Have you ever thought about how to get more customers? How about how you could have an unlimited marketing budget for your business?  It would be interesting, wouldn’t it?  Challenge is that for most people, this seems like a complete impossibility, because in the majority of cases, people don’t adequately measure their marketing.  As such, they aren’t aware of what marketing works and what doesn’t.  The result is that they “spend” money on marketing rather than invest it.  It’s a fact that 80% of marketing doesn’t work, so consequently without adequate measurement, marketing can appear expensive and therefore many people stop doing it.

By setting up clear measurements on your marketing, it’s possible to establish the cost per lead for each strategy you use.  When you know your conversion rate, you can then also determine the cost per sale, or acquisition cost of a customer.  In reality, that’s the purpose of our marketing – to buy new customers.

Next step is to calculate what a customer is worth to you – both on the first transaction, and then their lifetime value.  Let’s say that a new customer spends £1,000 with a margin of £400 the first time they shop with you, but then buy from you another 9 times (so 10 in total), each time spending £1,000 and generating £400 margin.  The lifetime value of the customer is £10,000 revenue and £4,000 margin.  How much can you afford to spend to buy the customer?  This is where you need to set your allowable acquisition cost.  If you want to get your money back on your first transaction, you can spend up to £400 to buy the customer.  And this £400 will generate you a further £3,600 of margin over the lifetime of the customer.  How many times would you invest £400 to get £4,000 back?  Thought so!

So if you want an unlimited budget, it’s time to start testing and measuring your marketing strategies, stop doing the things that don’t work or exceed your allowable acquisition cost, and ramp up the strategies that work.  After that, marketing is just maths!

How much do you need to invest to buy the customers you need to achieve your growth goals?

To find out more about obtaining new customers book a free complimentary session at https://goodtogreat.actioncoach.co.uk/