What other things can you do to get that first customer besides simply giving away your product or service?
When you know the lifetime value of your customer you can then back into the first sale rather than think of that sale as the last step. In the last Marketing Minute we talked about giving away the first sale but what else could you do? Let’s go back to our hypothetical supplement company example.
- Your average first sale is $30 and the customer then spends $50 per month and stays with you for 6 months. Their lifetime value is $330. The cost of sales (product, overhead, etc.) is $100, leaving you with $230 in profit. (In essence you have $230 to spend to get a new customer. At least that is your break even, anything you spend less than $230 will be profit.)
One of the easiest ways to obtain a new customer is to minimize the risk or remove the barrier to get them to be a customer in the first place. So, while you could spend all of your money 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—
- Offer some type of $30 discount to the customer via first purchase free, free gift, free product, or buy one, get one).
- Give your sales staff $30 for any new customers.
- 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.