I want to let you in on a little business secret:
PostcardMania actually LOSES money on every first-time order.
My Chief Marketing Officer did the math, and it’s true. We lose money — not a lot, but some — on 99% of orders by first-time customers.
So, you’re probably asking:
If it’s COSTING you to generate a new client, how do you MAKE money?
The answer to that question just might change the way you look at your marketing…
So if I lose money on first orders, how did I build PostcardMania from nothing into a $45 million enterprise?
Well, with a lot of hard work, first of all! But that’s getting off track.
We make money because we get a great return on investment (ROI) with our marketing!
ROI is about more than just the first sale.
For my company, yeah — we may lose a bit of money on the initial sale. But over the lifetime of that client, we know we’re going to make money!
How do I know that?
Not to toot our own horn…
But our clients get AMAZING customer service and GREAT results, so they reorder from us again and again.
It’s even a part of our mission statement that we want our customers to be “flipped out about our service and the results they get!”
If we generate a new client, and they don’t reorder — something went very wrong. (In which case, it’s our results manager’s job to figure out WHAT!)
But I digress…
Here’s how to figure out how much a customer is worth to YOUR business.
Now, this is a generalized plan of action that should work for MOST businesses. Keep reading to see if it will work for you. If not, don’t sweat it — just call one of our 25 full-time marketing consultants at 800-628-1804 to discuss what an accurate return on investment would look like for your business. They’re here to help YOU.
Step 1: Gather your customer data.
Here’s what you need to know:
- Average initial ticket price (how much they spend with you the first time)
- Average reorder ticket price
- How many times they reorder from you per year
- How long a customer stays with you
Step 2: Dust off the ol’ algebra book!
WAIT! Don’t click the “back” button!
It’s easy, I promise. I’ll show you how to do it!
Plug the numbers you got from above into the following formula:
A+D(BxC) = ?
For example, if your numbers look like this:
- Initial ticket price: $500
- Reorder ticket price: $99
- Number of reorders per year: $4
- Average number of years customer stays with you: 5
Your formula will look like this:
Then solve the equation from right to left.
Now your equation looks like this: 500+5(396)
Now all you’re left with is this:
And that’s your answer! Your average customer is worth $2,480.
Now, how does this tie into your marketing?
If you spend less to acquire that customer than your average customer is worth, BOOM! You’re making money!
Don’t know how much it costs your business to acquire a customer?
That’s another easy formula that I wrote about earlier this year! Learn how to calculate your customer acquisition cost.
Our client, Peak Family Dentistry and Orthodontics, has an awesome ROI story. See how they generate an 1,175% ROI here!
Need help figuring out how much a customer is worth to your business, or have any questions about your marketing at all? Feel free to email me at Joy.Gendusa@PostcardMania.com or call one of my experts at 800-628-1804 — it’s completely FREE to call!