Questions

In trying to determine whether to countinue advertising through a certain channel, it helps to know what the "standard" is for how much should be spent per customer. Should it be 100% of net profit for the first sale? Should you be making profit even after accounting for the cost of acquiring the customer? How long should it take for a customer to become profitable?

I like to look at what's known as "Customer Lifetime Value." Now, if you do not have any customers, this can be a bit difficult to come by. For me and my businesses, I'll pay up to 75% of the CLV to acquire a new customer.

So, for example, for this particular business (See screenshot: http://screencast.com/t/aMHBTGKBH7O), during our September/October launch, I determined that our Customer Lifetime Value (CLV) was $3,936.32.

Once I had this number, I was able to spend 75% of that amount on things like PPC and Affiliate/Referral Partner traffic to acquire more customers (Knowing full-well that I had 25% profits in store). I was able to go forward confidently with my marketing as I had already "done the math" behind this figure.

I give up to one (1) year for a customer to become profitable. However, using some of the strategies I employ, 90% of the time, I can acquire a customer and become profitable within the first 30 days.

I hope this helps answer your question. If you'd like to do a quick call to finalize any other questions you may have, I'd love to chat. Just let me know and we'll go from there.


Answered 8 years ago

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