Archive for May, 2010

There are some questions that immediately confuse business owners. One of them is to ask what their costs are of acquiring new customers. It’s surprising to think that companies don’t know, but a number of businesses simply have no clue, much less where to start. A business could have a fantastic product, with huge growth and profit potential, but if the costs of finding new customers far exceeds the profit generated, then it’s a complete waste of time. In addition, it’s not just about knowing the cost, but about taking steps to reduce those costs. Why are so many companies unable to figure out the costs of getting new customers? More importantly, how does a company figure out these costs and what can be done to lower them? We’ll look at the how and why, and provide insight into how to reduce the cost of getting new customers.

How does a company figure out its cost of getting new customers?

When it comes to figuring out the cost of securing new customers, there really is only one way to figure it out. Better yet, there is only one method to both figure out the cost, and lower that cost. Marketing is the one and only source a company has to figure out its cost of new customers. In addition, marketing is the tool by which companies can use to lower costs, and improve their abilities to secure new customers, and win business. So, how does marketing help find new customers, explain the cost of finding those customers, and ultimately show the path to reducing those costs? Well, it’s all about how efficient a company’s marketing plans are, and how that company goes about tracking the performance of their plans. At the end of the day, the methods are pretty straightforward. It’s the application and follow through that some companies do better than others. It’s this follow through that distinguishes the best enterprises.

How does a company track its marketing initiatives?

There really isn’t any secret to tracking the results of a company’s marketing initiatives. It’s a simple calculation to figure out the cost of each new customer that arises from a marketing plan. For example, let’s assume that a company spent $2,500.00 on an advertising campaign and found that it resulted in the acquisition of 50 new customers. The cost per customer for this marketing initiative is simply $2,500.00 divided by 50 customers, or $50.00 a customer. Now, this is merely a simple example, and the analysis if far more involved than that. The company would then want to know how many customers actually ordered, and what the growth potential would be for those customers. However, the principles still apply. It’s merely taking the total spent on a marketing initiative, and then tracking the results of that initiative. For the above example, if the gross profit generated by the sale of the product was only $60.00, then the cost of this marketing initiative was perhaps not as good as it could be. So, changes would need to be made, and new marketing plans adopted. However, over time, those marketing plans could be modified to produce far better results. A company wanting to know the best and least expensive way to find new customers, would make it a point to track the results of their initiatives. In fact, this is how companies both increase their marketing effectiveness, and reduce their costs of acquiring new customers. Consider the following table below. It shows the different types of marketing initiatives a company may use, with the number of new customers resulting from each initiative, and their appropriate costs. The best companies constantly update and modify each new plan, finding new ways to both reduce costs, and improve results.

What’s the cheapest way to find new customers?

What’s the easiest and least expensive way to find new customers? Well, looking at the table above, it’s rather obvious that word of mouth advertising costs absolutely nothing and produces solid results. If you’ve ever wondered how well your business is doing servicing your existing customers, then take a look at the number of new customers your business secures through word of mouth advertising. If your business is doing a good job, has a solid market presence, and is number one in your customer’s eyes, then you’ll see the results of your efforts in the number of customer references your business receives. This is perhaps the single greatest endorsement of having a good sales and customer service team. If your business is servicing clients well, you’ll see the results.

Tracking the results of marketing initiatives is nowhere near as difficult as it might seem. The easiest way is to simply ask customers how they found your business, and make sure to track their answers accordingly. Other methods include tracking the number of inquiries through your company’s web-site or blog. It is incumbent upon businesses to track the performance of their marketing initiatives and set plans to both improve their performance, and lower their costs. Marketing is not black magic, and the results of marketing initiatives can help put your business in front of customers, and ahead of your competition. Being a strong market presence in the industry your business services, will help position your company for years to come.

There are some great benefits to being a small agency. You might share my philosophy that staying small provides the opportunity for a variety of extraordinary freedoms the bigger shops don’t have, and therefore “staying small” is something worth fighting for. But being small also has its own set of unique challenges.

For example, every employee has a lot more power when it comes to delivering — or not delivering — on your brand promise. Our sheer numbers — employees, client connections, vendor interactions, etc. — are likely on a smaller scale than at a bigger shop. We don’t work in nearly the same volume, and when the canvas is smaller, the imperfections are more obvious. I equate it to this: It’s more apparent that a piece to the puzzle is missing when there are 75 pieces than when there are 1,000, correct? My point is that you’re only as strong as your weakest link. And if your chain is on the shorter end — as is the case with small agencies — each link then becomes that much more important.

Because small agencies can’t always compete with the big ones on things like breadth and depth of services, resources and quantity of staff, we need to stand out in different ways. The most important “different way” is to have a clearly defined brand that’s consistent, palpable, unique, energizing and memorable. When you’re bigger, there are more distractions to bridge and deflect from inconsistencies or inadequacies in the brand. But when you’re smaller, the sum of all parts is easier to grasp, and therefore those same flaws are more noticeable. Small agencies need to clearly distinguish who they are and then weave that into all they do — from what their letterhead looks like to the tone of their e-mails, the form and function of their Web site to the way in which visitors are greeted at the front door.

So where do you start in getting your small agency’s brand on track? First off, I’d begin by laying the groundwork for why this is important, specifically with your internal audience: employees. They likely recognize that bigger shops have size working to their advantage, but could probably use some insight into why smaller shops need to be more systematic and precise in the delivery of their brand. Next, shift to taking action. Here are a few a steps that will provide a framework for the process:

Define a core brand for your small agency and make it something ownable and differentiated. This won’t (and shouldn’t) happen overnight. Take some time to soul search, research, review and refine. Then step away from it for a while before landing on something. This is a huge step — and likely the most difficult — so take it seriously and approach it as strategically as you would for any one of your clients.

Review every single internal and external touch point for your agency — and don’t overlook even the most mundane details. Do those fake roses at the front desk really represent your brand, or should they be live orchids? A bonsai tree? No flora at all? Do your internal processes — like employee-review protocols and meeting formats — match your brand persona? How about marketing plan and reporting formats? E-mail signatures? The way the phones are answered? Letterhead? Take a good hard look at everything from client deliverables to vendor interaction and ensure that your brand is represented in all of it.

Create a feedback loop and make it actionable. Give both insiders and outsiders a medium to illuminate disconnects with your brand that you might not see. For example, we did this internally by establishing employee task forces on everything from our agency’s industry engagement to talent recruitment, and externally with clients and friends of the agency by doing consistent online surveys about our performance, establishing an interactive blog and an ongoing e-mail program. And establish procedures for reviewing your losses as well as your wins so you can continually refine your brand and how it’s lived out. Constantly check in to see how your brand is organically evolving — is it for the better or worse? Then do something with the findings. Don’t let what can be invaluable input sit idly by on the corner of your desk. Make big or small changes and make them swiftly and publicly to demonstrate your commitment to fulfilling your mission.

Be willing to live and die by the sword. If you can afford to do it (and in my opinion, you can’t afford not to), make sure your clients and the work you produce for them align with your brand intentions. If you are a cutting-edge digital shop committed to deploying the latest and greatest technologies, then perhaps you don’t take the car dealer down the street who simply wants a production house to develop a TV ad touting its weekend blowout sale. This sacrifice in the name of the brand is a tough one to swallow, but one we feel speaks volumes and will pay off in the long run.

These steps are things that larger agencies don’t necessarily have to spend time and energy on. And it may not seem fair that they don’t. But while we’re happily small, it’ll remain a priority for me and my agency as I’m confident it’s been what’s fed our growth spurt over the past few years and what will remain a major factor in what helps us thrive in years to come.

Article written by Meredith Vaughan

Article taken from Adage.com

• Always design a folded self mailer so the finished fold is on the bottom. This allows one wafer on top rather then 2 on the bottom saving the customer money.
• When mailing a concentrated flat mailing do not fold to a letter size. By folding it down you are not only required to wafer the piece, you are also unable to attain a DDU postage rate because it is no longer available for letters.
• Do you ever send out a direct mail campaign with multiple copy tests or versions printing in black (i.e., price tests, sales reps’ names, etc.)? These are often time and budget nightmares. When possible, it’s cost-effective to print shells (form or letter) and then ink-jet the copy that varies onto the shell at the same time you’re ink-jetting the address block.
• Consider co-mingling. Co-mingling means sorting your mail with another company’s mail of similar size to achieve the BMC/SCF discounts you wouldn’t qualify for with your mailing alone. With postage generally being half the cost of the job, these savings add up. Consider doing this if you are mailing a project that is nationwide and would normally not go to the BMC/SCF level due to a lack of concentration (meaning a mailing that is spread out thin across the United States).
• Make sure the aspect ratio of your direct mail piece is greater than 1.3 but less than 2.5. This will get you a better postage rate. To determine the aspect ratio simply divide the length by the width. For example, a 6×9 postcard has an aspect ratio of 1.5 which is good (9 divided by 6). This is why square mailers are good and bad. Good because the size is unique and it will stand out in your prospect’s mailbox, but bad because the postage costs will be higher than normal (aspect ratio is 1).
• Make sure you confirm that your direct mail’s address block uses a minimum font size of 8pt of any readable font. If it doesn’t, you might incur extra costs from the USPS.
• If you mail a letter package with a window envelope, make sure you do the tap test. What you do is take your letter package and tap the bottom side against a flat surface. According to USPS regulations, a minimum of .125” space around the entire address area must be maintained.
• Check Tabbing. If you send out self-mailers or booklets, make sure you consult with your vendor on the proper amount and positioning of the tabbing that keeps the piece closed. It may seem like a minor issue, but you could get hit with big postal penalties if you don’t do it right.
• Are you sending out letter packages? If so, make sure the components are sized so that it leaves at least a 1/4” on both the left and right side when inserted into the envelope and a 1/8” minimum throat. The throat is the opening height of the envelope. These measurements are required for efficient and cost-effective machine inserting of the components into the envelopes.