The Cost Of A New Customer

By: Dan Kennedy on: May 10th, 2010 6 Comments

The main thing that gets people interested in direct marketing is its value as a means of acquiring new customers or clients. With the increased and ever increasing costs of doing business it is critically important for the owner of the small company and for the sales person to be cost-effective in marketing.

That means that good control is exercised over the cost of getting a new customer. Many businesses grow their gross at the expense of their net. At least partially through uncontrolled new customer acquisition cost. They can literally grow themselves right out of business.

I’ve found that the best way to develop methods that work consistently, predictably and cost-effectively in acquiring new customers is through direct mail marketing. When you develop a successful cost-effective direct mail program you’ve got an extremely valuable asset. You’ve got a system that you can use over and over again for a long time with predictable results.

To use direct mail to effectively acquire new customers or clients you have to deal with demographics. Demographics are the statistical information about people that marketers use to select and target their prospective customers and clients.

Today computers have added a huge extra measure of sophistication to the collection and organization of demographics. So that it is literally true that if you can describe it you can get it. This makes it critically important to know as much as possible about your present customers and your desirable customers. The more information you have about the commonalities in your customer base the more efficiently you can select prospects.

Here’s a partial list of demographic information you might compile about your consumer customers – age, sex, marital status, home ownership, car ownership, major purchase behavior, credit card possession, income level, occupations, response to mail order offers, magazines subscribed to, cable TV subscription.

By collecting and analyzing data about your customers you might find, for example, that a significant majority of your best customers are between 30-35 years of age, male, married, own their own homes, have bought a new car within the last three years, have bought a flat screen or television set in the last two years, have an American Express card, earn between $50,000-$80,000 a year, are engineers or middle managers, are known mail order purchasers, subscribe to Playboy and have cable television.

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    ABOUT THE AUTHOR:

    Dan Kennedy is internationally recognized as the 'Millionaire Maker,' helping people in just about every category of business turn their ideas into fortunes. Dan's "No B.S." approach is refreshing amidst a world of small business marketing hype and enriches those who act on his advice. For more money-making marketing tips, tactics and strategies, go to www.GKIC.com

    6 Responses

    1. Jason Dove says:

      And, of course, if you already have a substantial customer list it can be possible to use it for identifying potential new customers by extrapolating its demographics.

    2. Charles Ra says:

      partial list of demographic information
      age, sex, marital status, home ownership, car ownership, major purchase behavior, credit card possession, income level, occupations, response to mail order offers, magazines subscribed to, cable TV subscription.

      I think credit card possession i one to pay attention most. if we want to sell them online.

    3. Rob Anspach says:

      “best customers are between 30-35 years of age, male, married, own their own homes, have bought a new car within the last three years, have bought a flat screen or television set in the last two years, have an American Express card, earn between $50,000-$80,000 a year, are engineers or middle managers, are known mail order purchasers, subscribe to Playboy and have cable television”

      that is some demographic…

      I wonder how the buying power of the list would change if Playboy was replaced with a biker mag, or tech magazine?

      Even simple tweaks to your buying list can have a significant impact on your results.

    4. As you always say, Dan, not nearly enough thought is given to the “who” in marketing.

      Your recent presentation at the 2010 GKIC SuperConference in Dallas on “Magnetic Marketing For The New Economy” really drove home this point.

      Several of my GKIC Chicago and Northwest Suburbs Chapter Members who were there have already told me how they are segmenting their lists more — and how excited they are about the improved results they’re about to start seeing as a result.

      Thanks, Dan.

    5. Something that I hear on a regular basis when I ask the question “who is you target/ideal customer?” is ‘EVERYONE!”.

      Hmmm… wrong answer!

      Breaking it down in to demographic chunks is a great way to allow businesses to visualise ‘who’ their target audience is and this is has worked for me in the past to great effect.

      And as you mention later in your post, a great way for them to start segmenting a market is to look at current customers and see where the commonalities are.

      Simon

    6. Jim Bowman says:

      The “who” is the basis for everything else. I recently gave a client a questionnaire focused on customers and USP. He had several of his employees complete it and I compiled the answers into a single document.

      This is a service company that doesn’t stop at tech training for all employees; it also conducts sales training. The techs nailed the ideal customer profile, in this case, “female professional, age 40-to-60 who has to have someone else let us in the house or take time off from work to do it herself.”

      Knowing their customers so well is a big reason this company gets nearly half its new customers as referrals, has grown at double-digit rates throughout the recession and recently moved to much larger quarters. Oh, and they understand price elasticity.

      Jim Bowman
      ThePRDoc®

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