Your Business Numbers Coach....Go to Your Next Level

3 Things Every Business Owner Should Know About Marketing

#1 What Is Marketing?

This is a question that can inspire lengthy discourse and an entire day’s worth of discussion in Marketing 101 courses around the world. Many consider marketing to be the art and science of positioning your business and your product or service in the marketplace, creating a brand identity, and promoting awareness. I wish that I could get all of the academics to agree on my simple definition: “marketing is all the things a business does to create sales opportunities.”  It really is that simple.

Some people think that marketing is limited to those initiatives that you spend money on—advertising, websites, brochures, direct mail, public relations, and signage. Truthfully, all of these elements should fall under the umbrella of “marketing communications.”

While these are essential components of a complete marketing program, of much more importance are the marketing planning activities that come well before these programs are implemented. For example, some essential planning activities include:

I can go on and on here, but the key point is that like anything else, when you do your homework before jumping into action, you’re more likely to generate the results—and return—you’re looking for.

Hint: companies that try to offer something for everyone often end up selling little to few.

#2 What Does a New Customer Cost?

Believe it or not, I come across very few businesses that track this metric, and quite frankly, it’s very important as well as easy to measure. You can calculate the cost of a new customer by totaling all of your marketing spending and then dividing that number by the number of new customers acquired. When you do this, you understand why many businesses fear the advertising man or marketing consultant because this number clearly shows that advertising doesn’t pay. Acquiring a new customer is far more costly (estimates range from a factor of five to a factor of 10) than keeping and advancing the relationships you already have.

Hint:  If you’re selling to customers one time only and you have not defined other revenue streams, it’s much more difficult to get a positive return on your promotional investments.

#3 What Is a New Customer Worth?

I’m not talking about how much profit you generate from the average customer each time he or she chooses to do business with you. Instead, I’m referring to the lifetime value of a customer. This metric is much more difficult to measure, or even to estimate. Why; because it requires very good tracking of individual customers.

Whether or not you are able to track specific customer visits and spending, the nugget of wisdom embedded in the notion of customer relationships is that building customer loyalty is valuable. There is a very strong correlation between long-term business success and long-term customer relationships. Successful marketing strategies nurture every stage of the customer lifecycle—from acquiring new customers to increasing loyalty to up-selling, cross-selling, and advancing relationships to increase customer lifetime value.

Hint: I recently received a $25 gift card from Starbucks for being a good customer. How did they know I was a good customer? They track how often I visit and how much I spend, since I put most of my purchases on a prepaid debit card. How much do you think that gift improved my loyalty to Starbucks? And what did that card really cost them?