Tuesday, January 10, 2012

Buying profitable customers

As small business owners we often wrongly believe the most important thing in our business is our product. We spend so many hours, so much blood (and tears) building, refining, polishing and admiring our products, we are seduced into believing that our product is so good, customers will beat down our doors to get their hands on it. We invest ourselves in our own products. We love our own dog food.

 But product love is a mermaid song that will seduce your ship onto the rocks. If your navigation is set on product, rather than on gaining customers, your business will surely sink. You cannot make a profit without customers.

 Do you like dog food?

 If you like making dog food, you better find some dogs, or you`re going to eat it yourself.

 Gaining customers are the objective. Using products to do so is part of the strategy to reach your objective...merely a tool.

 Strictly speaking you don`t even have to have a product at all: You can sell other people`s products. You can even sell an idea for a product...if you have the customers.

 So lets look at the problem of gaining customers logically, soberly and calmly:

 Many, many, many small businesses say they market "by word of mouth." That "strategy" is slow motion death for a business. It is the result of product love: when one becomes obsessed with making the worlds best mouse trap shinier - instead of investing time, energy and money to find customers who will buy it.

 "Word of month" is not marketing. It is abdication. A non-strategy where you rely on fewer and fewer customers to sell your product on your behalf.

 Buy a customer

 So, rather than endless tinkering with a product, why not BUY a customer?

 Like big business does.

 They spend millions on advertising, branding and marketing. Effectively, they are spending money, to buy a customer, who will buy their (or someone else`s product) - which will make them a profit.

 You and I can do the same - without spending millions. Did you know we can buy a qualified lead (aka potential customer) for a few Rands from Google? Anyone (with a budget of R 10.00 per day) can set up an ad campaign on Google and buy clicks - ie a person to come visit a web site. You pay only when the lead arrives at your web site.

 Naturally you need an effective web site before you start buying clicks: A site designed with a carefully considered most wanted response, and with clear and powerful calls to action. Why would you want to waste money and effort to buy clicks to a non existent or ineffective web site, right? It works like this:

 3 Steps to buying customers (profit)

 1. Get (buy) the qualified lead:
 Pay attention to demographics like where the person lives, gender, age, language, time of day, day of week, etc.

 2. Use your web site to convince the lead to make contact with you:
 Understand your objective and use quality, original content to guide the lead to a most wanted response and then convince him/her (with a clear call to action) to give that response - fill in a form, download information, give his/her contact info, request a quote, etc.

 3. Contact the lead and make a sale:
 Follow up on the lead generated: make contact, discuss requirements, answer questions, build trust. Make a profit.

 (See our web designer service for more info and help)

 Which brings us to the question of how much to pay for a customer.

 Fortunately, that is quite easy to calculate. It is called ROI or Return On Investment.

 Without boring you with long formulas, it comes down to this:

 How to calculate return on investment

 1. Conversion rate: How many visitors to your site do you need to convince one to make contact? (The better designed your site, the higher this will be)

 2. Closing rate: How many contacts do you need to make a sale?

 3. Profit: How much profit do you make per sale.

 Example: If you need 100 clicks to make 1 sale and make R 100 profit from that sale, then paying R 1.00 per lead (click) is break even - waste of time because you are not making any money. So, I would offer R 0.50 (or less) per click...which translates into 100% profit (on your R 50.00 investment)...which is starting to look like good business.

 The bottom line

 In the final analysis a business exists to make a profit. If it does not, it wont.

 We can get all emotional about it and cry ourselves to sleep when we see our bank statement, but business is best done logically, calmly and soberly. Tears will not increase liquidity. Not even when expertly delivered in the bank manager`s office...on your knees.

 Buying clicks and using an effective web site to turn them into customers is a sure way of having a super successful year...so...good luck!

1 comment:

  1. Thank you for the Ideas , I have hear about it but never knew how it really works; I'm busy saving money to lunch my delivery company covering Pamphlets , ad in news paper , do the click thing and banners in shopping centres; Once I got the money to do all that I will make the company public .