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

Many times, when we discuss how to grow business we only discuss tactics. However, I think an overall understanding of the strategy behind the tactics is the more appropriate place to start. Afterall there are only four ways to grow your business, and an almost infinite number of tactics to accomplish these. I’ll illustrate these points using one of my favorite pastimes, comic books. Here we go…

1. Get new customers: This is where many tactics focus; “how can we get more customers?”. This is vital to success, and is the best way to begin growing your business.

Comic publishers are constantly creating new books, and re-launching others. How many times have we seen a new issue #1 come out. One of my favorite comic characters is The Punisher. The guy has about 20 #1 issues (Punisher ongoing, Punisher War Zone, Punisher Max, Punisher War Journal volume 1 and 2, etc). Look at how many comic book movies have been released. As a matter of fact, look at how many times comic characters are licensed period (tooth brushes, action figures, bed sheets, etc). Sure, the comic companies make a ton of money licensing these heroes and villains, but the licensing opportunities also serve to create interest in the comics. Don’t even get me started on crossover issues; moving right along….

2. Increase the average dollar amount per transaction: This may seem like a “no brainer”, and it is. If the average transaction is worth more money, then of course, your business will increase. This is assuming that the same amount of customers purchase your product or service; obviously you will need to focus on the laws of economics. Simply increasing the price isn’t what I’m talking about. This could also mean lowering cost or adding value added merchandise / services (did someone say “bags n boards”?). Basically, think of any way that you can increase the average dollar amount of the transaction.

If you read comics, you probably realize that prices have been slowly increasing over the years. (insert old man voice) Why when I was a kid, sonny, comics used to be a buck per comic, now the average price is about three dollars. Some special issues are even four dollars per issue. But remember, it’s not just about price. Increasing the number of books you take home each month is also part of this equation (enter the crossovers, and event stories).

3. Increase the average number of transactions per customer over a certain period of time: Notice the part where I said “over a certain time period”. This timeline is very important, and many marketers seem to leave it out. Basically, if a customer purchases more often, then you will grow your business.

New comics come out every week, but for the most part a new issue of a given book will come out once per month (12 issues a year). Let’s say, you have good taste, and read Deadpool. That means that you have three books per month that you may consider buying. Oh but wait, he’s also going to make an appearance in that new X-Men book, so you may want to consider that one too. You get the idea. Now imagine buying books for more than one character with each character appearing in multiple books. Punisher + Deadpool + X-Men + Spider-Man + etc = you, broke.

4. Increase the length of time your average customer stays loyal to your business: A customer will only be a customer for a finite period of time. Even a lifetime customer will go away at some point. We all die at some point afterall, however business is forever… in theory anyway.

I can’t remember where I read it, but I remember seeing somewhere that the average comic book reader sticks around for about 4-5 years. By creating event stories that are basically sequential, companies like Marvel comics have been extending this readership past the 4-5 year mark. Beginning with Avengers: Disassembled (and continuing with House of M, Civil War, Planet Hulk, The Death of Captain America, The Secret Invasion, Dark Reign, and The Siege), Marvel has offered at least one major story per year, each one building on the momentum from the previous story. This creates a much larger epic arc for each character and keeps readers coming back to see what will happen next.

These are the only four ways you can grow your business. As you can see, the tactics are nearly limitless, but by understanding each strategy, you will have a much clearer understanding of which tactics to employ, when, and for what purpose. Remember, good marketing should lead to sales.

What do you think?

In this link, Robert Middleton (founder of Action Plan Marketing) discusses an interesting tactic in pricing. I’ve actually heard this one before from a sales person I used to work with. Just like all sales people, he constantly had to face clients unwilling or unable to pay the price for the product or service he was selling. I asked him what he did in those situations and he told me “tell them you can lower the price, by taking away one of the features.”

I was amazed by the simplicity. But you know what? It works. Lower the value of your product, and then the price will follow. It takes you the same amount of time and money to produce the product; it takes the same amount of work and effort. Why should the price be lowered? Especially in these troubled economic times, most customers will be willing to do a little extra work if it will save them money. If they aren’t then they are basically valuing their time over yours.

Another tactic that Robert discusses in the link is to create tiered levels of the product or service. You know, Platinum, Gold, or Silver (hopefully you have more creative names than that, but you know what I’m talking about). Once the client has bought in on the value of what you offer and is ready to discuss price, the discussion becomes “which of these do you want” rather than “do you want it or not”. 

Agree / Disagree? Hit that comments button below or email me at edwardviator@evil-marketer.com

If you’re in business, then you want to make a profit. Let’s break this down, there are basically three variables that control profit… costs, sales, and price. Profit, by definition, is revenue (sales x price) - costs. While most companies spend a ton of time and effort cutting costs, and improving advertising / marketing / sales activities, most do not spend this same time and effort on pricing practices. Personally I don’t really understand this. Pricing is just as important as the other variables, and can also affect your sales volume (a more effective price will naturally result in an increase in sales).

Lately companies have been focusing more and more on cutting costs in order to improve their “bottom line”. Cost cutting has been refined down to an exact science (though many cost cutting efforts in fact have a negative effect on profit, but that’s a whole other story). Likewise, most companies are constantly working on new marketing efforts, some more effective than others. However, when it comes to pricing many companies wing it; they base prices on the wrong things, or even worse, they don’t have a person that decides on pricing strategy.

Most companies have a chief financial officer,a director of sales, and a director of marketing. Why not have someone in charge of pricing. Every company should have someone who’s sole purpose in life is to define the pricing strategies for each product. Make sure they use actual methods, and aren’t just pulling prices out of the air.