fs11868446 largeOnce you figure this out you will know who is more predisposed to purchase your products/services. Then, you find other businesses with the same customer base who you can customer share with. Come up with an incentive and great arrangement to encourage both of your customer bases to shop at both of your stores.

The basic concept is this:

  • You want to find existing businesses who have the customer profile that you are looking for to market your products/services to.
  • Then strike up a relationship with those business owners to work out an incentive for customers to purchase from both businesses.

As a result, you have an audience to market to and they generate an added value from their current base. As all good first year economics students will tell you, it makes theoretical sense to spend up one cent less to get a sale than the benefit you receive from a sale to maximize income. The tricks to doing so are first, the world is a messy place so you need to factor risk in and second, what is the value of a customer you should be looking at? [rquotes]Pick the wrong measure of value and you’ll leave a lot of money on the table. [/rquotes]

So, how do you figure this out? There is a great formula from Jay Abraham you can follow with great success.

LV = (P x F) x N – MC

Here’s what it all means:

  • LV is the life time value of a customer
  • P is the average profit margin from each sale
  • F is the number of times a customer buys each year
  • N is the number of years customers stay with you
  • MC is the marketing cost per customer (total costs/number of customers)

This calculation is referred to in direct marketing as the “Lifetime Value of a Customer”. Think about an insurance company. Their customer buys a policy from an agent in year one and may well remain a paying customer for 20 years or more. That’s why an agent may get almost off of the money paid during year one as commission, the insurance company knows they just bought many years of recurring “sales”.

Once you know how much you need to spend to attract a new customer, you will know how much of an incentive you can offer to a business to help attract new customers.

So, here’s your step-by-step process:

  1. Find companies who already have the customer base you are looking for.
  2. Negotiate an incentive for them to share that customer base with you.
  3. Focus your marketing resources to this group of predisposed customers.

If you need help working through this process, check out our FREE test drive for the most comprehensive system of marketing tools and resources.

-        By Coach Phil Gilkes