You’re in business to make a profit. Profit = revenue - costs. We’ve already discussed how to find the lifetime value of a customer. The other half of the story is finding out how much it costs to acquire that customer. Here’s the formula…

Add up your direct marketing and advertising dollars and divide by the number of new customers you acquired as a result.

This will give you a price per customer. If you’re price per customer is more than the lifetime value of a customer, then you’re in trouble. Even if the lifetime value is higher than the cost of acquiring the customer, you still may be in trouble (you do have other expenses afterall). But this at least shows you a ballpark way of figuring out if you are spending your marketing dollars wisely. Once you have your numbers, you can start to look at ways to tweak things to make your business more profitable.

Do you know of any other tangible ways to find out if you are making the most of your marketing budget? Share the knowledge my friends and email me at edwardviator@evil-marketer.com