Putting money straight into advertising is one way to start putting more profit on your bottom-line.
However, there are far more cost effective, much more profitable and far easier ways to get yourself and your business new customers …
But first, we need to understand a simple idea about what business really should be focused on – and that’s profitable customers …
Let me explain.
Whenever you advertise, you are essentially “buying” a new customer, and that costs money.
A simple example is if you ran an advertisement for $2,000 and got 100 calls from the ad which in turn produced 20 sales.
How much did it cost to “buy” each customer? If you divide $2000 by 20 sales, you spent a total of $100 per new customer.
The $100 is your “acquisition cost” or “cost per sale.”
Essentially it’s how much it costs you to buy a new customer.
Take this idea one step further, and you see that your ad got 100 people to call in to your business. These calls are also known as “leads” … so you’ve now established that the cost of your 100 leads (or your “cost per lead”) is $20 ($2000/100).
Think about your business for a moment.
Do you know these numbers? If so, great.
If not, you need to go and work them out. Even if you get a lot of business by word of mouth, referral or just passing foot traffic, you need to count these as well.
Why is this important?
Because numbers mastery is key to turning chaos into control in your business. You can’t change what you don’t know, can’t identify or don’t measure.
And the numbers in your business are vital if you want to improve the most important number in your business – and that’s your bottom-line …your profit.
So if we follow our example to this point and pretended your business was a restaurant, what would happen if each new customer you just “bought” came in and spent $100 on dinner? How much money did you make from each customer?
That’s right … you lost money!
It cost you $100 just in advertising to get them there, but it cost additional dollars in overhead and labor … perhaps to the tune of $30 for food and drinks to serve them, $30 for staff and $10 for additional overhead, so all up, you just spent $170 for $100 in …
In short, each of these new 20 customers were actually a loss to the business.
So how do we turn this around?
Here are four great ways to turn your “bought” customers into profitable customers right up front.
1. Write better advertisements. Create a better headline, a better offer and make sure you only advertise in media that reaches your target audience. Just a few tweaks “here and there” can make a dramatic impact on response rates.
Let’s look at the numbers if we doubled responses. Now, you’d get 200 callers and your cost per lead would drop to just $10 each.
That’s a great start, and assuming the other numbers stay the same, we are down to just $50 cost per sale and thus $120 out for $100 in. There’s still more work to do, but you are on the right track …
2. Work on your conversion rate. Next you’ll want to work on getting more of your callers (”leads”) to come in and buy.
Boosting your conversion rate is often as simple as measuring it and as complex as creating scripts for your salespeople or receptionists to follow.
So, what if instead of 1 in every 5 (20 out of 100) coming in, you could get 2 out of 5? Now, you are getting 200 callers but instead of just 1 in 5, you are getting 2 out of 5 people to come in and buy.
That means you are up to 80 people booking in and buying from you. Your acquisition cost or cost per sale is now down massively.
Now, your $2,000 ad gets you 80 buyers at just $25 each. Now when we do the math, our marketing is starting to make a profit on every new customer, with just $95 out for $100 in. Great work …
3. Work on increasing your average sale. Next, you’ll need to get the customers that do come in spending more every time they buy.
Instead of $100 each time, your challenge is to add value by up-selling other items or offering a better wine list, or any other idea you can sit down and work out, maybe increasing your average sale to $120, $150 or even $250.
Think of it like one of my old clients, a pharmacist who offered every single person who bought from him a bag of jelly beans. Just by asking, he ended up selling more packs than he ever thought possible.
4. Finally, work on getting repeat business. The last task is to get people coming back – because repeat business in a business is where the real profit lies.
Get your customers’ details so you can follow-up with them as often as you can. The key is to make sure you engage them on a regular basis … everything from a simple “thank-you” card to upgrading your customer service – and invite them back to your business as often as you can.
No matter what you do, remember you are literally buying customers with your advertising and marketing and that process is getting more expensive every day.
But once you’ve got your customers, keep them for as long as you can. Good service goes only so far, and from there it’s completely up to you and your marketing to invite your customers back and give them great reasons to buy from you again and again.
For executive coaching click here … For more on Brad Sugars, click here …
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