Business is basically shopping for customers – choosing which one you want and deciding how much you will pay for them.
When it comes down to it, you are in the business of buying customers. You can start a business, run it from home and never tell anyone about it, but you will not succeed because you need customers to buy your product or service. And customers will cost you.
You may need to have a location people can find you – a bricks and mortar store or a website. These cost money.
You may need to meet people to tell about your business. You will need to drive or fly or hold webinars or attend networking groups. These activities cost money.
Or you may advertise, hire a sales person, or do email marketing. Again, these all cost money.
So, we spend money to get customers. We are buying customers.
So how much will we pay for a customer? What is a customer worth to us? We can calculate this amount based on our average sale and profit margin. Our Acquisition Cost is how much we spend per customer. Often this is our Net Profit divided by our customers.
Sometimes we will spend more than this amount, however. That’s why we look at Lifetime Value. If our customers buy from us more than once (and you had better have a plan to make this happen!), we may want to spend more than the profit they bring in in one visit because they will spend much more in the future. Calculate the average number of visits a customer makes and multiply by your average profit. This strategy is a Loss Leader strategy – just make sure you KNOW you will get them back for subsequent visits.
Take a fresh look at your business – are you clear on what a customer is worth to you? And do you understand your role is buying customers?
As an ActionCOACH, we focus on changing clients’ perspective and change their goal to a Business That Works Without Them. Brad Sugars is the founder of ActionCOACH and the author of Buying Customers.