A recent discussion in one of the LinkedIn Groups addressing small business owners focused on how to best calculate your cost per lead.
So, here’s a simple approach…
In Month A, you spent $10,000 on generating sales and that produced 1,000 inquiries. That’s a $100 cost per inquiry.
Over the next 12 months, you spent $10,000 on nurturing those 1,000 inquiries and that produced 100 sales. That’s an additional $100 investment, which means a $200 cost per sale.
Each customer purchased $500 worth of products and services, and averaged 20% profit. That means you produced $50,000 in revenue and $10,000 in profit. It also means that those 100 customers cost you $200 to generate $100 in profit…which is a loss of $100.
That’s why retention and repeat sales are important! You can go broke selling 1 time to a new/first-time customer.
Now, the next question is ‘How do we turn a profit on those new, first-time buyers?’ And that requires an action plan for [a] increasing the average order size and/or profit on those first purchases, and/or [b] motivating new purchases as soon as possible. (Rather than waiting for them to come back on their own when they’re ready to buy again.)
That’s where you see [ex] restaurants offering new customers a free dessert if they come back for another dinner for two within 30-days.
Or when your eye doctor offers you 15% off your next purchase of frames if you [a] refer a friend and [b] order within 90 days.
Or when your accounting firm offers you an incentive if you will refer your employees to them for tax preparation or financial planning services.
So what’s your strategy for turning those first-time buyers into repeat buyers and/or advocates that refer profitable new business?