Why Focus On Cost Of Customer Acquisition vs. Retention

When I first stumbled across Jay Abraham, the marketing genius, he mentioned there are three ways to up the growth of your business. That’s to increase traffic, to increase the frequency of purchase and to increase your prices. What we have here and talking about the cost of customer acquisition versus retention, is traffic versus upping the frequency of purchase.

He mentioned that it is somewhere on the other of four to ten times as difficult and costly to get more traffic or more prospect eyes on what you have to offer , than actually reselling to the people that already bought from you.

This is a very important point that anyone that want s to be successful in business needs to know. In order to use your resources most efficiently its best to sell to people that are already in the position to know you, like you and trust you. That have their wallets open, not trying to force others. Not that it’s a bad approach, but we are talking efficiency here. And there are three things to consider.

Customer Factor #1: Marketing Budget

Obviously, if you are a small business and your all about boot strapping your entire marketing effort, you’re not going to have a lot more of capital to work with.

You’re probably doing most of the stuff yourself using free tools that are available and maybe some cheap outsourcing applications or websites that are around there,. Chances are your don’t have a 2 to 5 to 10 percent budget to work with for marketing efforts alone. So, go with what you have and spend the least amount of money in the people that are interested in what you have to say.

Customer Factor #2: Volume Of People Needed

If you have 100,000 people coming to your website and only .1% of them buy its going to take a lot of resources to maintain that kind of conversion rate; that is the number of people that buy compared to the number of people that visit. Time is your most valuable resource and you want to maximize your efficiency.

There’s a huge volume of people that’s needed to meet your numbers, and instead of emailing the people that have already bought from you or sending them direct mail for a new offer that you have, whereas they may only go out to 1000 people, but if half of those people buy you spend a whole less money to meet your numbers.

Customer Factor #3: Conversions Are What Matters

You know what this is for, don’t you? A-counting money… *groan*

That brings us right into the point of conversions are really what you should be focusing on. And even then, it is not so much the conversion percentage that matters, but the revenue gained at the end of a set period of time. You need to be able to measure what you are doing and putting into your marketing efforts so that you can use the analytics and results-mining process to figure out, “hey, this method works better than the other.”

Don’t take my word for it, try it, you’ll probably find out yourself that its much more costly and difficult to get more eyes on your offer than to offer to those that have already seen it or are interested.

It’s All About the Customers

If you are wondering about what is best for your business with your budget in mind, comparing the cost f customer acquisition versus retention really boils down to your marketing budget, the volume of people needed to meet your number and conversions at the end of the day.

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