Getting new customers is easy if you know how. Most people in business do it the hard way. I’ll show you the easy way. And it’s also the cheapest way to get all the customers you want.
To do this I need to explain what’s known as the “Lifetime Value” of a customer to you. No matter how large or small your business, no matter what product or service you sell, you must first calculate the Lifetime Value of your customer. Once you know it, you can decide exactly what you can afford to spend to bring in a new customer – and the best way to go about it.
In a nutshell the Lifetime Value of a customer is…
The average purchase value, multiplied by the number of times they buy from you in a year, multiplied by the number of years they remain your customer.
For example: You own a restaurant and your regular customer spends £25 each time they visit you, of which £15 is profit. Let’s say they come to eat 12 times per year and stay with you for 2 years on average.
This makes your regular customer worth £15 x 12 x 2 = £360 in profit to your business.
And once you know this…
…you’ll know what you can afford to spend in order to get new customers.
Most marketing promotions consist of ads in the newspapers and magazines, beautiful brochures and outdoor signs. They do mail shots telling the world about their wonderful products, service and themselves. And they usually offer a ‘special’ discount. Something weak, like 10% or 15% off or £10 discount every time you spend £100. Let’s face it – how excited do you get when you see these promotions?
Well, let me tell you about Warren, an Australian entrepreneur who built a business starting from zero using this approach. He spent $1 million building 3 tennis courts, swimming pools, game room and barbecue facilities in the middle of Sydney. The place was magnificent. There was one problem:
He had no customers.
So this is what he did. For one month he advertised in the local newspapers: Free Tennis Lessons, Free Court Hire, Free Barbecues and Swimming Pool Parties. And guess what happened? That’s right!! The place was packed out from 7 a.m. ’til 10 p.m. every day that month.
He gave away lots of tennis lessons, sausages and court hire. It cost him a few thousand dollars. The interesting part is that at the end of the month, he had a going business. The courts were booked solid, and have been ever since.
Warren understood what a new customer was worth to him. He knew that once people got used to playing at his courts instead of someone else’s they’d be back. He charged more per hour for court hire and coaching than the other tennis court complexes. But the customers got extra value with the swimming pool and barbecue facilities and friendlier service.
Because Warren knew what the Lifetime Value of his customer was, he gave something away and ended up making a fortune.
But what if you don’t have a tennis complex? How can you apply this to your business? Here are some examples:
- Accountants, lawyers and specialist consultants can give away a free consultation worth £150.
- Florists – a free bouquet.
- Grocery shops – coupons for free food items.
- Car service centres – free first service or free brake checks.
- Landscapers and nurseries – free lawn reports.
- Retail businesses – no strings attached free gift vouchers.
Anyone can use this technique. I am always offering potential customers FREE information. And some of those people end up spending thousands of pounds with me.
What I am really doing is “buying” new customers.
“Buying” new customers with an irresistible offer really works, and it works amazingly well almost every time. However, please be warned, it won’t work if:
- your offer is weak
- you target the wrong people
- your product or service is lousy
- you don’t follow up your customers
Human beings are creatures of habit. We keep doing the same old comfortable things we’ve always done. To get a potential customer to break their habit of going to another business, you must give them a very strong reason to try you. That’s why a FREE offer is so effective.
It’s a risk free way for them to get to sample your product or service.
A Word Of Caution
Before you rush out and start making free offers to the world, work out the Lifetime Value of your customer and test all your offers and ideas on a small scale.
Analyze the results, adjust your approach if needed, and only then go all out. If you test everything you do on a small scale first, you’ll never get burned. custom logo dress socks