In a perfect world, every customer you bring in would stick around for the long haul. It’s a lot cheaper and easier to sell to someone you’ve sold to before – someone you already have a relationship with. The broad consensus is that it costs six to seven times more for a company to win over a new customer versus keeping an existing one happy. Additionally, companies like Entrepreneur have reported that you’re 60% to 70% more likely to sell to an existing customer, whereas making a sale with a new customer falls into the 5% to 20% range.
Still, to grow your business, you’re blasting your value proposition to the crowd trying to bring in new clients. You could be doing this through marketing campaigns, in-person sales visits, cold calling and a number of other methods. The question is – do you know how much it’s costing you to seal the deal? If not, you could be spending precious time and money on things that aren’t showing the right return for your dollar.
Some back of the envelope math:
Total $$ Spent on Outreach / # of New Customers = Cost per Customer Acquisition
When we say “Total $$ Spent,” you may be quick to add up the costs of marketing materials and move on. Not so fast. If you did a direct mail campaign, as an example, how much time did it take you to conceptualize the promotion? Did you mull over copy? Did you stuff the envelopes yourself? What about your staff? That’s time you could have spent supporting your business in other ways. You’ve absolutely got to factor these labor hours in.
Now, let’s talk “# of New Customers.” Bummer – you can’t just add up the new customers who came in after the campaign. We wish it were that easy. But, it’s not likely every customer you gained recently came in as a direct result of your marketing. So, how do you know who did? Consider asking customers how they heard about you or what brought them in. Or, if you’re promoting your business online, add a “How did you hear about us?” field.
This may seem tedious. Here’s why it’s worth it: If you can accurately calculate the cost of each new customer, you ensure you’re not spending more to bring a customer in than you’re making on the sale.
Let’s recap. Some of your activities might not be paying off as much as you thought they were. The good news is you can recover and adjust. Here are some options:
- Get some marketing help via consultants, contractors or even a full-time employee. Many local business owners are tempted to do everything themselves. Just because you can doesn’t mean you should (or that it makes sense to). Consider an investment in marketing, and spend your time running your business.
- Invest in a software solution that takes care of these types of things. Save yourself the time and frustration.
- Try something new! If you’re not comfortable looking outside your current resources quite yet, try new methods of generating leads. Get creative!