Marketing is buying customers

Marketing your jewelry business is nothing more than buying customers.

That’s it, and the sooner you understand it, the more comfortable you’ll be spending money on everything from advertising to sales training and from public relations to customer relationship management tools.

When you think about it, anything and everything you do to attract a new customer, or get an existing one to do business with you again, is marketing. And everything you do to achieve any of those goals has a cost associated with it.

Place an ad in the local newspaper or a major industry magazine…it costs money.

Some companies hire a salesperson and put him on the street. Even if he is a direct commission guy and doesn’t pay you until after the sale is made, he still bears the cost of recruiting and training. And while he doesn’t pay an up-front salary, in this case, he still pays that commission on every sale he makes.

PR… that’s FREE advertising, right? Don’t tell that to the companies that pay PR firms or in-house PR specialists to get that press coverage. Even if you do it completely yourself, you have to invest time, and we all know that time is money.

No marketing is free

No, there is no free food in the world of marketing. You want new customers or old ones to come back, it’s going to cost you.

This fact cannot be avoided, but it can be quantified. You can find out how much it costs you to attract a new customer and how much it takes to keep existing ones coming back.

And while most companies can’t tell you what the specific numbers are for these two acquisition costs, anyone with half a brain can see that they should.

How else can you make smart, informed and wise decisions about marketing your business?

What was your advertising budget last year? What percentage was spent on attracting new prospects, customers, clients, or patients? How many did you really bring?

The formula

If you spent $100,000.00 on advertising last year, but $30,000.00 of that was on programs designed to get existing customers to come back again, your new The customer acquisition budget for the year was $70,000.00. If you attracted 1,000 new customers with that budget, each of those new customers will cost you $70.00.

Whether that’s good or bad is relative. It depends on what your average ticket is and what your margins are, and how often and how many times a typical customer comes back to buy. But the bottom line is that you now know something critical that will help you make future marketing investment decisions.

If you run an ad campaign that brings in customers at $83.27 each, you know it’s not an effective campaign. It may have been a weak offer or it may have been delivered to the wrong audience. It may have been a lackluster headline, or you may not have bought your media well. But you know you have a problem if you didn’t at least match your average point-of-purchase cost, and you can look to make changes to improve results.

On the other hand, a campaign that generates customers at $64.23 a piece is a success. You spent less than normal to bring them. It’s a keeper and should probably be tried again, assuming all else is equal, such as the average ticket and the willingness of these new customers to return for future purchases at the typical rate.

Power of testing and tracking

Tracking these numbers also strengthens your negotiating position with the media.

“Look Bob, I know you have a rate card, but the truth is your station costs me $97.30 per customer, while KBS across town brings them to $68.20. If you want me to keep doing business with me , you will have to get me a price that generates new customers at no more than my $70.00 average.”

Now Bob can work with you on the price, or he can’t. If he does, his acquisition cost prices stay in line. If not, he can stop doing business with Bob’s station and not lose a second of sleep. It was too expensive for what you get. Move that marketing investment to a place that hits your numbers.

Of course, to figure this out, you need to track your results on a regular basis. That means making specific offers and a specific call to action in your marketing efforts. It asks people to walk in, mention a specific ad, bring a coupon, call a specific number or extension, or mention a specific code.

Example

We have a client who is testing the local radio. He is watching three different radio stations. After a week he has gotten responses from only one of the stations. How does he know? Because he made different offers at each station.

Next, you’ll change the ads so that offer #1, which ran on station “A,” now runs on station “B.” Offer #2, which was at station “B” will now be at station “C”, and the offer at station “C” now goes to station “A”.

If the responses still come from the same station, our client will know that it is the station that is accounting for the response and can spend more money there, and less or none with the “loser” stations. If the responses follow the offer, you know you’ve found a winning offer and can replace the losing offers and still use all three stations.

Of course, the number of ads airing on each station is the same, as are the time slots the commercials air in, so you’re trying to remove variables other than station and supply. This is somewhat of a simplification of the process, you get the idea.

Bottom line

The point is that you want to be aware of what it is costing you to attract a new customer to your jewelry business. Naturally, the goal is to “buy” them for the lowest possible price, and then, ethically, get the most out of them, keeping them over time.

Not unlike stocks…buy low, sell high. Only when it comes to buying customers, you can have much more control over the market.