There are really only 3 ways a business can increase sales and grow profits. I call them the three Mo’s:
- Mo’ People
- Mo’ Money
- Mo’ Often
1. Mo’ People – Get more customers (more people who will buy from you).
Most businesses focus their resources (time and money) on this – getting more customers. They mail out thousands of slick brochures, pretty postcards, and verbose letters. They spend BIG bucks on advertising in newspapers, magazines, circulars, and directories. They have huge sales where they hope a new customer will be enticed by disgustingly low prices.
All this “stuff” that companies do to get new customers is VERY expensive. Plus…
It’s tough to make it work
Direct mail marketers are often satisfied with a 1% conversion rate. That means out of 100 mail pieces sent out, only 1 person bought something. That also means 99 out of 100 pieces of mail:
- never made it to the prospect
- were ignored (and trashed) by the prospect
- didn’t excite the prospect at all
- didn’t excite the prospect enough to stir immediate action
Not only that, but if it cost you $1 to send out each mail piece, you’d better make $100 in profit on sales to the 1 customer that responds or you’ll LOSE money.
It can (and does) work – but only when the per-person cost of your campaign is much less than the lifetime value of the new customers you acquire. For example, if you’re selling yachts or private jets, you can send out expensive mailings to your prospects because just one single conversion will put you on easy street.
There’s a pretty famous new customer acquisition success story from a few years ago. Many of you can remember when you couldn’t open a box of bath soap without finding an AOL disk inside. But, here’s the deal… the lifetime value of each new AOL customer was somewhere in the hundreds of dollars – I’m guessing $400 at least. Each one of those CDs probably cost 20¢ or so to produce and distribute. So, let’s do the math. AOL only needed to get 1 customer for every 2,000 CDs (.05% conversion) to break even. 2, 3, or 4 new AOL customers for every 2,000 CD’s (.1%, .15%, and .2%) would mean a profit of 4, 8, or 12 hundred bucks for every 2,000 CDs. Now you know why they were EVERYWHERE.**
**NOTE: Too much of a good thing? Although the AOL CD campaign worked well in the beginning, AOL ultimately saturated the market with free CDs and the campaign’s conversion rate dropped well below the profitable level. The company finally abandoned a campaign that was alienating the pubic and loosing money BIG time.
But even a successful campaign like this takes a huge amount of time and money.
Getting new customers is tough and expensive. If your business is brand new then you’ve got no choice. Customer acquisition campaigns are a necessary evil.
The good news is that if you’ve been around for a while and already have customers, there is far more money to be made with far less effort and expense if you focus on #2 and #3 – Mo’ Money and Mo’ Often.
2. Mo’ Money – Get more money from your customers each time they buy from you.
3. Mo’ Often – Get your customers to buy from you more often.
Also as I’ll show you later when you really take the time to educate and provide exceptional service to your clients you can use that trust and confidence you build to create a steady stream of high quality referrals.
