As a business owner you always have to be concerned about marketing cost and marketing ROI. But how realistic are your expectations and how much should you truly spend to acquire new business? Are you strictly looking at the value of the initial sale when thinking about what to spend or are you considering the lifetime customer value when looking at your marketing budget and ROI?
According to Jeff Haden, BNET Contributor, thinking like this is a mistake. Jeff says, “you should almost always spend more to acquire new customers than you think, especially if you can land the right customers.”
Like any other business investment, you should think of customer acquisition costs as a true investment in your business, not just a cost that drains your bank account. Customer acquisition costs are an investment intended to “generate a reasonable shot-term return and a significant long-term return” states Haden. This is not something that you tweak every month just to make your overall expense budget “work.”
Haden uses himself and his photography business as an example on a new approach to looking at your marketing budget and why you need to spend more to acquire new customers than you actually think.
“We’ll use me as an example. I’m a ghostwriter and I also photograph weddings. (If you’re curious why I do both, this is why.) To keep things simple, assume we spend $5,000 a year on sales, we book 20 weddings a year, and the average price of a wedding package is $4,000. Quick math:
Sales: $80,000
Sales cost per transaction: $250
Sales cost as a % of sales: 6.25%
Are we happy with those results?
Check out Haden’s response at TeamBishop | Internet Marketing Guidance: How to Make Your Revenue Grow: Spend More to Acquire More
