Attracting New Customers

The life blood of a business is its ability to attract and retain new customers. 

Having clear understanding of the value of a customer critical.

Lifetime value of a customer is calculated as follows:

Average value of a sale

Multiplied by

Number of purchases per year 

Multiplied by

Number of years a customer stays with you

Example: If a customer spends £80, 3 times a year for 3 years.

The lifetime value of this customer is £720

An alternative calculation is to use profit per sale.

The same calculation as above using £16 Profit would be.

£16 x 3 x 3  = £144 Profit

This is useful information when deciding how much to spend to attract new customers.

This is especially powerful when to combine it with

Payment for Results Marketing

Attracting visitors to your site at a fixed cost per visitor is a clear example of payment for results marketing, as you only pay when someone visits your site.

This combined with your Conversion Ratio - The average number of visitors for each customer.

Example : 

If you have 200 visitors a day to your site and 4 visitors buy your conversion ratio is 2% (2 in every 100 visitors).

Conversion ratio's will vary from business to business.

If you know the life time value of your customers and your conversion ratio you can calculate how much you are willing to spend for each visitor.

All these calculations are Variables and must be measured and controlled.

The selection of your keywords will impact your cost per customer.

Acquisition cost per customer  =  

Cost per visitor x Conversion ratio 

Example : 

If you pay 5p per visitor and your conversion ratio is 2% your cost per customer is £2.50

Would it be profitable for you to attract new customers for £2.50?

Do you know? 

If not it would be useful to have that information. 

If you are just starting your online business you will not have this information, but using this type of marketing it is easy to conduct simple tests.  

Using Pay Per Click search engines you can test a number of Keywords at low cost and because these tests can be done quickly you can also test the copy of your web site for effectiveness.

When a visitor clicks through from a Pay Per Click search engine they are taken to a web page on your site of your choosing, Not necessarily your home page.

This means you can set up a page for a particular Keyword and track variables for that Keyword.

If you would like to know more about this form of marketing or our services please contact us.

Keyword Resources . Instant Web Traffic . Search Engines

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