Is it worth it?
Published by Nick Hall on 31 May 2010.How much is one new customer worth to you?
The answer to the question is remarkably effective in helping us understand and balance an investment vs. new customer ratio. The goal, obviously, is to ensure that the cost of attracting a customer is substantially less than what that customer represents in potential revenue. You can define revenue any number of ways (ie. potential influence, referrals, short term, life time, etc.) so I'll leave that to you to hammer out.
One method we're having remarkable success with is Google AdWords. When mixed with other program elements - including of course web - they are tough to beat when it comes to quality lead generation. Costing fluctuates depending on the client's market type, but one of the campaigns we're running right now has provided the client with 240 leads (not just click-throughs) for the whopping cost of $13.92 a piece. When you consider that each conversion represents a formal request for contact regarding a $100,000 investment, it's a tough media to beat - if done right.
The next challenge is to convert as many of those inquiries into customers as possible, and we've been assisting with some new tools and ideas to help them do just that.
If you really understand what a new customer is worth, it will go a long way towards helping you figure out how much you should be spending to get them. And that starts to make what we do look a whole lot more like and investment and less like an expense, which is just fine with us.
If you need help with the math, contact Justin Ogglesby. He'll be delighted at the opportunity to flex his Economics degree.