Entrepreneur

Business Owners, How Much Would You Pay For A New Customer?

“Why is advertising so expensive?”

“I’ve been spending so much on advertisements, but I’m getting little results from it.”

I’ve been hearing this from many sources: agencies, principals, friends and colleagues. Truth to be told, I don’t think that is a right question to ask. To begin with, it wasn’t about how expensive a leaderboard is or how high are you bidding against your keyword.

It’s a question of how much are you willing to pay to acquire new customers.

Image Credit: World Web MS
Image Credit: World Web MS

Let me put it this way—instead of viewing it as a question, it actually serves as a way to view budgeting differently than before. In a sense, it’s about finding out the critical path (within your reasonable budget) to acquire new customers. Have an exact figure in mind, such as “I’m willing to pay RM50 for a new customer.”

All of a sudden the whole marketing process makes sense. I’ll need to work within that budget to find leads. But hey, how did I get that figure of RM50? Normally you’ll be able to estimate this figure based on the growth that you’ll need, which can be translated into the following checkpoints:

  • Number of leads (retail stores or stock keeping units etc.).
  • Number of opportunities.
  • Gross merchandise value per month VS number of buyers VS cart size.

The thing is, many channels will contribute into your business growth. It’s a matter of growth rate. Some channels work better than others. So instead of questioning the effectiveness of a single channel, as a marketer, it is crucial to find out which channel performs the best. Let’s take event marketing as an example:

  • Invited 1000 pax to event.
  • Out of 1000, only 100 responded.
  • Out of 100, only 50 attended.
  • Cost per lead = number of attendees over total cost of venue rental, cost of collaterals and cost of telemarketing,

Technically speaking, by understanding the effectiveness of your campaigns, you’ll be able to forecast the potential returns—be it online or offline marketing. So how does it relate to the question I posed? Simple.

It’s about getting the bang out of your buck.

Customer Engagement

Image Credit: MarketingLand
Image Credit: MarketingLand

A few weeks ago, I wrote about why it pays to understand your customer. Only through understanding the buyer journey will you have a holistic approach to your marketing journey. You’ll be able to identify several touchpoints that they went through which would help you in crafting engagement strategies. You’ll be able to draw inferences on marketing executions like:

  • Increase of bunting placements drives more sign-ups to my local stores.
  • By sending out X boarding emails, my conversion rate increased by Y percentage, which lead to an increase of Z in sales.
  • Running 5 different Facebook campaigns on rotational basis increased my sign-ups by X percentage.
  • And many more…

This whole process forms the funnel movement. The better you understand your customer, the more accurate your funnel is. The way that funnel works is that it feels like a storyboard where you set up engagement points on where your potential customers get to know about you, date with you, and eventually, marry you.

Image Credit: Skyrocket Marketing

Through different sets of activities, you’ll be able to understand which media mix works best for you, and you can optimise them further for better effectiveness. For the record, GHL and their subsidiary company, e-Pay is advertising really well on Facebook with their re-targeting campaign. From what I could see, they have at least four re-targeting campaigns that come in a sequence to convert you. It’s not really hardcore advertising, but it flows like a storyboard format which encourages you to find out more.

In a nutshell, the more effective your advertising mix is, the lower cost it’ll be, which means more business for you.

A World Of Screens

Image Credit: Wersm.com
Image Credit: Wersm.com

I own a laptop, a smartphone and a tablet, and I believe nowadays, most people would at least have a laptop and a smartphone.

We use a laptop for heavier tasks like writing articles, doing coursework or researching on topics, but somehow, it doesn’t stop us from checking emails or Facebooking. We were used to WhatsApp-ing through our smartphones until they introduced a web version/desktop app for it.

Think about integrated marketing channels. Think about 360° campaigns. Think of what would you want your customer to experience. Think about the journey.

The thing is, we have multiple devices that make us behave and interact differently from before. It is up to us, as marketers, to find out the mix that works best, or even situations where we could target, for example, if the customer is stuck in a jam but browsing Facebook.

We live in an omni-channel world where we need to consider multitude engagements to our audience. You can’t rely on a single source to drive traffic or awareness towards your product. You need to have multiple placements and think about your customer experience and journey.

Budget For A Campaign, Not An Item

Image Credit: Ask Liz Weston
Image Credit: Ask Liz Weston

In the past, I’ve shared that how online marketing metrics can be deceiving and the results I’ve gotten based on different avenues. When I was planning for these campaign, I’ve always viewed them as a whole; how can one engagement point push the lead to another point, therefore, helping me in converting them.

Understanding the funnel movement will help regardless of a B2C (Business to Consumer) or B2B (Business to Business) environment where you get to see micro-conversions or the process of converting potential customers into your real customers. With each medium having its own objective, at the end of the day, all marketing dollars should contribute to one ultimate goal—increasing sales.

Here’s the question again for you: how much are you willing to pay to get a new customer?

I think putting budgeting this way helps me identify a clear and achievable goal. The amount that you’re willing to pay doesn’t come from the sky, but from business data, where business owners or managers will need to be familiar with.

This article was written and contributed by Carl Lim.

Feature Image Credits: ThisKoleoBasa

 

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