• Simon Zryd

What I Learned About Buying Customers

Updated: Oct 6, 2021

Let me ask you a question: You were invited to a birthday party and you arrive a little early to help with getting everything ready. As you arrive you find out that there aren’t enough eggs for the birthday cake. What would you do? Most people would offer to go out and buy them, right? The cake needs to be finished and in order to do that we need eggs.

I want you to start thinking like that for your business. If you need more customers then simply go out and "buy" them. Now probably some of you don't relate to your marketing as buying customers, but that is exactly what it is. Unless you receive a qualified referral, chances are that your clients somehow have heard about your product or service through your marketing efforts.

In order to be able to buy your customers you need to know a few things - how much money can I spend? What will I get for the money I spend? What is the customer that I buy worth?

Unfortunately many small business owners don’t know their numbers, which makes it very difficult for them to make educated decisions about their marketing.

Lifetime Value of a Customer

A starting point for almost any marketing strategy or campaign is the Lifetime Value of a customer. The Lifetime Value of a customer is the amount of revenue a customer brings into your business for as long as he/she remains a customer.

There is a simple formula you can follow to identify the Lifetime Value of your customers.

LV = (P x F) x N

Here is the formula broken down:

LV is the life time value of your customer

P is the average profit margin from each sale

F is the number of times your customer buys each year

N is the number of years customers stay with you

Now you know how much revenue a new customer brings into your business on average. Isn’t it interesting to look at marketing from this perspective? It is much easier to identify how much you can afford to spend on “buying” a customer through your marketing campaign.

But buying something is a transactional process. You pay a fixed price for an item of value and you receive that item in return.

Tracking Your Marketing Performance

So in order to be able to exactly tell how many customers a certain campaign will create, and therefore the price you pay for each customer, you need to start tracking the performance of your marketing campaigns.

Let’s illustrate this with an example. Let’s say you’ve determined that the Lifetime Value of a customer is $5,000.

You have tracked your marketing campaigns performance for the last year, and you have determined that each time you run a certain campaign you will generate 50 leads of which you are able to convert 10 into customers.

So each campaign that you run, will make you $50,000. Would it be worthwhile spending $1,000, $2,000 or even $5,000 on this campaign? Of course it would!

I would go out all day and spend $2,500 on a marketing campaign that will make me $50,000 in return! (Of course I would start to look how I can generate the same results with less costs, but it wouldn’t even be necessary.)

The biggest takeaway I want you to get from this is: Start to track your numbers! Once you nail a certain campaign and you can predict how much revenue it will generate for you, marketing will become as easy as going to the grocery store and buy a dozen eggs.

To keep things simple in the beginning, here are a couple key numbers you want to track in your marketing besides the Lifetime Value of a customer and of course your profit margin.

  • How many leads is your campaign generating?

  • Of those leads, how many are you converting into clients?

If you need help determining the effectiveness of your marketing campaign check out my new website: www.BreakthroughPerformanceAcademy.com for the most comprehensive system of marketing tools and resources.

#Marketing #BusinessDevelopment

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