Tuesday, February 19, 2008

Cost of Acquiring a new Customer

The cost of acquiring a new customer and the formula that goes with it are very simple.

Take your complete marketing budget, add in the salaries and bonuses of Inside/Outside salespeople, take the cost of pre and post sales support and add in the price of a barrel of crude oil on the commodities market, blend in the estimated yearly cost of toner cartridges, pare in the variable cost of picked lobster meat, divide it by the number of business days in a year and take the piece of paper in which you detailed this elaborate formula and promptly set it ablaze.

The only thing smart business people know is it costs A LOT of dough. So much that most businesses concentrate all their efforts on their best prospects…their customers.

And that’s not a bad idea. Reward is not the only thing that comes with Risk.

But if real, organic growth is targeted, you better figure out a way to find new, profitable customers- hopefully within a budget that isn’t going to reduce your business to a third rate lemonade stand. Or the Business Boneyard.

No matter how you slice it, it’s going to cost money and it’s NEVER easy.

Most senior managers choose to beat the crap out of their existing, salaried Sales Managers and salespeople. “Open some new doors!!...what the hell do you do all day?..”

If you’re the guy either meeting payroll or answering to the people responsible for direct-deposit checks arriving in a timely fashion, you probably feel more than entitled to asking that question. I been asked that question many times, usually accompanied with a menacing stare.

If it was easy, every business that sells to other business would be operating at 20-40% gross operating margins.

If your team is smiling-n-dialing with their hats in their hand, good luck with that. I mention this many times in these pieces. Have you or anyone you’ve ever know EVER bought ANYTHING from a cold, telemarketing solicitation?

At best, you fielded a cold call from a highly skilled, very patient sales/businessperson professional and, over a period of time, the relationship grew and a mutual understanding of each other’s unique business challenges and offerings evolved. Eventually, a business problem materialized. You selected that vendor to solve the problem. I just laid out what takes place in approximately .00000401 percent of business-to-business cold telesales calls.

If you’re not creative or the people you’re paying to sell are not creative, things are not going to get any easier. And I don’t mean Guerilla Marketing creative though some of that can be effective. If you’re not positioning your outbound sales and marketing efforts to where the prospects are eventually calling you, it might be time to take a step back.

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