How easy do you make it for a new client to start doing business with you? Developing any new relationship is difficult, but once that relationship is established, then given your delivering great value, great service and the outcome your clients expect, they’re going to keep coming back for more, aren’t they? So really it’s about getting over that first hurdle, making it as easy as possible for your prospects to convert into clients, so you can build a long-term relationship with long-term profits.
Because for most businesses, a substantial amount of their profits will come from those clients who keep coming back and buying again and again over the years, so getting them to buy from you in the first place is critical, and you need to get them to that point as quickly and as painlessly as possible.
As a starting point, if you knew what a client was going to spend with you over the term of your relationship, then you’d have a good idea of how much you could afford to spend in acquiring that client, wouldn’t you? If you knew, for example, that your average client stayed with you for 3 years and spent £500 with you 4 times a year, and if you also knew that your Gross Profit margin was say 50%, then the “Lifetime Value” of that average client would be:
£500 spend x 50% gross profit x 4 purchases per year x 3 years = £3,000
So, if for every new client you acquire you’re going to make an average £3,000 gross profit, then what’s it worth spending to get them on board in the first place? If it cost you £1,000 then you’re still well ahead of the game, but actually, you don’t need to spend anything like that amount. All that’s required is to make that first purchase so easy, so instinctive, that your prospective client just can’t say No!
First off, you could just reduce your price by 50% for the initial sale, so your cost of acquiring that new client becomes £250 in our example. Simple, but in my opinion, not very effective. Yes, it’s going to be very attractive to your prospects, but they may well expect similar discounts on future purchases, which is something to be avoided at all costs!
How about something a little more inventive? Why not take that £250 cost of acquisition, and use it to add value to the original offer? You could spend some of the money on more product or service and give your prospects twice the quantity on their first purchase. Or you could use some of the money to buy complimentary products or services and bundle them up with yours to create an attractive high-value package.
And of course, now you know what you have available to spend to acquire a new client, you could invest that money in your marketing system or even pay it out to your sales people as increased commission. That would get them focused, wouldn’t you agree?