One of my mentors, Bill Glazer, legendary and outrageous marketing guru always says he "makes a sale to get a customer." Most businesses look at it the other way around. They think, "I need to get a customer to make a sale."

If your business is one where people return to you time and time again, your objective should be like Bill's. Your focus should be on how to get a new customer and not on the profits from the first sale. Profit will come later when they continue to purchase from you.

Here are a couple real life examples and two that easily come to mind because I did it a few times myself, CD and book clubs. For only $1 you get 10 CDs or 4 books. That is an irresistible offer to a music or book lover, and an easy way to get a new customer. Who cares if you have to buy 4 more books or CDs over the next three years. You would probably do that anyway.

Initially, the cost to Columbia House or Book-of-the-Month club is at a loss. They're not concerned though. They know they will recoup that and more because they know your lifetime value.

So how can you make this work for your business? What can you do to make it easier and faster to get new customers?

First off, you need to determine the lifetime value of a customer. To figure this out, take the average sales revenue a customer brings on an annual or monthly basis whichever works for your business. Then determine how long on average your customers stay with you. For instance, say you sell supplements. The average first sale is $30 and the customer then spends $50 per month and stays with you for 6 months. Their lifetime value then is $330.

Now, determine what the cost (product, overhead, etc.) is on the $330. Let's say the cost of sales is $100. That leaves you with $230 in profit.

Based on this scenario, you could easily give away the first purchase of $30 to get that customer because you know they will spend an additional $300 leaving you with a profit of $200.

Think of how many more customers you would be able to get using this offer versus the number of customers you would get with no offer at all. If you are able to get twice as many customers this way, you would increase your revenue by over 40%. A loss leader but a profit generator.

Although the above example is basic and there would most likely be a bit more involved in computing your customer lifetime value, the point is to know what this number is and then to determine what you are willing to spend to get a customer.

One of the easiest ways to obtain a new customer is to minimize the risk or remove the barrier in getting them to be a customer in the first place. So, while you could spend all of your profits on traditional marketing via print ads, radio, tv, direct mail, etc., a portion of these dollars should be used to make it easy for them to become your customer. Here are other ways the supplement company could attract new customers besides giving away the first $30 sale. All in all, it is essentially the same $30 discount but packaged differently.

Buy One, Get One Free

Free Gift with Purchase (something other than what they can get from you)

Free Product with Purchase (a natural add-on to what they are purchasing or something completely different to open up new avenues)

If you have a sales staff you may want to use the $30 as an incentive for them to bring in new customers. You could also use the $30 to reward your customers for referrals.

To summarize, you could—

1. Offer some type of $30 discount to the customer via first purchase free, free gift, free product, or buy one, get one).

2. Give your sales staff $30 for any new customers.

3. Give your customers $30 for any referrals.

The total of the above is $90 leaving you with $140 to reinvest in your business or take as profits. Best of all, you have 3 additional avenues of getting a new customer.

Author's Bio: 

Kathy Jiamboi is the President and Founder of Creativedge Marketing and Ready2Go Client Contact. Creativedge Marketing specializes in the development and implementation of automated marketing systems. Ready2Go Client Contact is a "done for you" communications service covering both print and electronic media that allows clients to stay in touch with their customers with little to no effort on their part.

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