Archive for the ‘Business Building Secrets’ Category

I know, I know…huh?

“Joe, I am not going to give away my house to start all over again trying to make a mansion.”

I don’t expect you to literally give away your house.

But if it was guaranteed to make you 100 million dollars you would do it, wouldn’t you? That is what we are talking about here, a concept known as…

The Lifetime Value of the Customer.

This concept is so critical to the future success of businesses everywhere, yet even some Fortune 500 companies are missing the boat big time. That is what I hate about lists like the 500…they mean absolutely nothing in the big scheme of things.

Any one of those companies, under the right circumstances…

Can fold up like a tent, and get packed away in a suitcase.

But this post is not a rip on the big 500 companies in the world…because some of them do “get it.” They understand the lifetime value of the customers they serve.

So why put your business at risk? You probably don’t have the resources that the big guys do to stay in business even when times are tough, do you?

So, here is the concept in a nutshell…

Every customer of your business runs through a certain buying cycle…or lifetime. This is the cycle where a customer considers your offerings, responds to your follow up marketing attempts, and purchases or invests in all of the possible offerings you have that fits their needs.

When this cycle finishes, the customer no longer needs what you have to offer, and does not purchase from you again. In some cases, this cycle does not end until the customer’s life actually ends (real estate for example, if the agent does his/her job).

During this lifetime…there is a certain number of dollars purchased. Figure out what this dollar amount is, on the average, and you have the key in your hand to business success.

Let’s create an example (sorry, it’s from the offline world, but applies here too).

Two general automotive repair shops, in the same city, have the following similar stats:

1000 customers in their database, averaging $300.00 per each transaction.

The top 20% of each automotive shops customers average 3 visits a year. That is 200 customers visiting three times each, or 600 visits from the best customers.

So, at an average transaction of $300.00 each visit, that is $180,000 annually from the top 20% of the automotive business.

The average length of time each customer in the top 20% stays is 10 years. Then, the customer either moves from the area, gets another car and switches to the dealership etc… The lifetime of the customer ends at 10 years.

So…each customer in the top 20% spends an average of $900.00 in three visits per year. At the end of the lifetime of the customer…these customers spend $9,000 each.

And that is important.

Knowing that information, that a customer in the top 20% of your business spends $9,000 with you by the end of 10 years…

You have to do whatever it takes to acquire and keep customers initially to ensure you get your $9,000!

What are you doing in your business to acquire customers? Is it the same “ho-hum” stuff that everyone else in your industry does, or do you have the “stuff” in you to separate your business from the pack?

Let’s return to our example, and make a comparison.

Automotive Repair Shop A takes this information and does what everyone else does with it…keeps doing what they are doing. They are out of business in 10 years or less, period.

Let me repeat that, they aren’t just growing slowly, they are out of business in 10 years or less. In this hyper-competitive business world, where more than 80% of small businesses FAIL in less than two years…it is an absolute.

And the really scary thing is…90% of the business owners who read this post will do nothing with this information, absolutely nothing.

But what about Automotive Repair Shop B?

Automotive Repair Shop B sends out a regular mailing to keep in touch with its customers. They do an important bit of math though, that separates them from the rest of the pack…

They figure how much they want to invest in every customer of their top 20% to get their $9,000.

This is critical. So what does Shop B actually do that keeps them separated once they have figured out what they want to invest?

To acquire customers, shop B sends out a new customer mailer that offers 4 FREE oil changes.

Total cost (remember, this is cost, not retail) = $60.00 per customer.

To double the effectiveness of that mailing, if the customer refers one more customer to take advantage of the same 4 FREE oil change offer…the original customer gets an additional FREE oil change…for a total of 5 FREE oil changes.

Total cost now = $75.00 to acquire two customers plus another $60.00 for the second customer’s four oil changes.

Total cost for two, $9,000 customers = $135.00

So…how many times do you want to trade $135.00 for $18,000 over 10 years?

“But Joe, you moron…now I have to keep a customer for 10 years to gain that serious advantage!”

To which I respond:

“Uhhh, yeah. You didn’t get into business to lose customers, did you? You do know that is much less expensive to keep customers, than it is to acquire them, right?”

Which brings me to the last part of this lesson.

Keeping customers for life. We started out in Automotive Shop B’s example only investing $135.00 for TWO customers, that will average $18,000 over 10 years.

What on earth makes you want to stop there?

Do you want to ensure you get that $18,000 over 10 years to keep two customers? Keep in mind these are the top 20% of your customers, so they are the good ones to begin with.

You have to do better than $135.00 in this day and age. Sorry for the good news.

So, here is the kicker…what if, over the entire 10 years you invested a total of $1350.00 in exchange for $18,000?

Automotive Shop B gets this important piece of the puzzle…

For $19.95 a year, each customer can get FREE OIL CHANGES FOR THE LIFE OF THEIR CAR!

What a deal, huh?

Every 3,000 miles or three months they can get another complimentary oil change! No ordinary oil change either, one complete with vacuuming out the car, washing windows, topping off fluids etc…because Automotive Shop B understands that each opportunity for an oil change is an opportunity for an inspection, which results in additional revenue.

What a deal. So your questions and challenge for the day is…

What is your “oil change?”

What is the lifetime value of your customers?

What house are you going to give away to build your mansion?

One is a powerful word.  Especially for today’s lesson.

One of the main reasons people fail to make money using the internet is due to a lack of focus when getting started (and sometimes when they continue after getting momentum).

When getting started…

You need one reason.

(for me it was helping to grow businesses and seeing the reaction on business owner’s faces once they achieved true freedom)

You need one skill.

(in the beginning, for me it was copywriting and a little bit of marketing…now it’s much more of a role as an online business-results coach and copywriting)

You need one niche to explore.

(for me, business owners that wanted to use the Internet to generate 1 – 100% of their revenue)

You need one method of monetization.

(sell my skills and knowledge to that niche)

So you can earn one dollar.

(did that in 2001)

Once you do that, you repeat and duplicate until you are making considerable income from one business.  But you have to earn that first dollar first…before even thinking about the “thousands” or “millions” you’ll make.

Find

One and

Capitalize on it

Until you’re

Successful

That’s the one key that opens the front door to success, and if you’ve already started gaining momentum…the one key you must return to when you feel like things aren’t going as planned with your online business.

It really is that simple folks.  But not easy…as it’s extremely likely that you’ll be faced with 1000’s of distractions and seemingly better opportunities along the way.

Forget them.

If the other opportunities were so much better than what you are / want to working on now…you wouldn’t have them being marketed to you…you would have to go and find them.  People don’t share the “real” secrets for $47 in an ebook…period.

So now, the choice is yours…

Are you going to F.O.C.U.S. and get real about your business…or get a job slaving away for someone else and line their pockets?

Until next time…

Joseph Ratliff

P.S. Hey, do me a favor and share this post using the cool little symbols below?  Or, subscribe to this feed via RSS or email by clicking here to continue…

I hear this question way too much.

Here is the answer…

As much as you want.

I know, you are probably getting ready to fire up your email program and roast me for such an elementary answer…but don’t do that just yet.

Here is the rest of the answer…

In the right places, using the right techniques, directed at the right audience.

Period.

This mentality with your marketing will consistently produce a solid Return on Investment.  So, invest as much of your available funds this way…because it will just keep making money for you.

But here is the catch…

Miss any one of the three key elements:

1) The right places (market area)

2) The right techniques (correct message, and type of marketing)

3) The right audience (marketing your product to someone who wants to buy)

And your campaign goes BOOM (it implodes)!

Period.

It doesn’t matter if you invest 3% of your sales or 30% of your sales…if you have the three key elements locked in…you will get pretty much the same proportion of Return On Investment.

So if you invest $100 on marketing your business properly, and get $200 in sales from that investment…what would happen if you invested $1000 in the same marketing campaign? $10000? $100,000? That’s right, you can keep on trading investment for profits until the market dries up (which is extremely rare, so no excuses). =)

In my humble opinion you have two options…

1) Keep tossing a bunch of marketing and advertising dollars at the “wall” and hope they stick.

2) Focus your message, use the right method, and make sure the people reading that message will want your product or service. And PROFIT ALL DAY LONG.

I already know which option you would like to choose.

What are you going to do in your business today to choose it?