WE CONTINUE our series for small business owners.
Last week, we started answering the questions of Mrs PK, a spa owner with two branches.
She said she was finding it more difficult to make money these days. So she basically wanted to know the following:
1. What marketing ‘weapons’ are best for her small business. She is now using print ads, radio ads and flyers.
2. If she should start investing and using software to keep track of her customers (even though she is a non-techie) and start a database.
3. How to get started doing e-mail marketing the right way (to send health newsletters to her customers and prospects).
In answering Mrs. PK’s first question, we started by doing a basic accounting of how much it cost for her to acquire new customers through print ads (the same could be done for flyers and radio ads.)
Very, very few small business owners measure their marketing efforts and thus fail to know the cost of acquiring their customers.
Many just place an ad or blow a couple of thousand pesos on flyers and wish and hope that a “lot” of people respond.
But hoping and wishing is not a strategy.
Although it is a good attitude, you’ve got to back it up with measurement and numbers to determine if your current ad and promo strategy is working or not.
If you don’t instruct your staff to tally how many people responded to an ad you placed or brought in a flyer to avail of a special offer, you’ll keep on guessing on what is hot and what is not.
It is a discipline and you need to develop a culture of measurement (versus guesstimates) at your office. If you don’t, next time you ask your staff, “how many people called today about the promotion we advertised,” you’ll get a subjective measurement like “marami po” (a lot) or “kaunti lang” (just a few). With that kind of generic stats, you’ll never be able to know how many new customers were brought in by your advertising.
So last week, we went through the step by step “how-tos” to measure and count how much it cost to acquire a customer and came up with the following:
“For every ad I place in this publication, I get about 45 inquiries, about 20 percent of them are converted into customers – or about 9-10 new customers, and these 10 customers spend a total of P11,000 ($230) in my spa or P1,100 ($23) per visit.” ($1=P48)
“The ad cost me P7,000 or P700 per customer. Meanwhile, the cost of the spa service is about 40 percent or P440 per customer.”
So the question we posed to end last week’s column was: Should Mrs PK continue to use this print advertising “weapon” to acquire new customers?
Simple addition tells us that Mrs. PK spends P1,140 to ‘buy’ a customer through the print ad – or P40 more than the cost.
Should she continue advertising?
Yes, if …
1. She has a system to retain her customers and get their loyalty. (Which will bring us later on to the concept of CRM and keeping a customer database.) If the customers that she bought through print advertising keep on coming back, then the cost of advertising will now become an investment, i.e. the next time a customer that was generated by the print ad comes back for another high-end P1,100 spa treatment, Mrs PK’s spa now makes P660 on that customer since the cost of customer acquisition has already been made.
2. She can approach the sales manager of the publication and negotiate for a lower rate; or inquire about doing an ex-deal/barter (whole or part.) This will cut the cost of her advertising.
3. The response and conversion rates maintain or improve. Test different ad copy and offers in the ad (read Guerrilla Marketing by Jay Levinson or Instant Cashflow by Brad Sugars for promotions and offers that get response).
Now do the same for the brochures, flyers, direct mail and radio ads that you spend on.
Measuring and counting the acquisition cost of a customer spells the difference between looking at marketing as a cost and looking at it as an investment.
Next week, we’ll look at a marketing weapon that Mrs PK can use to buy customers at a bargain.
It’s a digital weapon that a growing number of entrepreneurs and even big corporations are using or misusing – e-mail marketing.
Keep on sending your comments or questions to marketingrx@pldtdsl.net or text us at 0918-3386412.
