The Edge Marketing

Let me first say that I did not choose 3 ½ instead of the usual 3 to be different or clever… I opted for the fraction because I can’t decide whether my ½ is really a part of one of the other three, or deserves is own number, so I chickened out and compromised. Judge for yourself…

I won’t delve into these in great detail for two reasons… First of all, they are easy-to-grasp concepts, even for novices. Secondly, you’ll find these discussed ad infinitum in countless business textbooks and marketing websites. You should be ever mindful of them, however, as you develop your plan.

1. Getting New Customers: The reasons why businesses try to acquire new customers is obvious so I won’t insult you with further explanation. Still I will reiterate that the vast majority of America’s small businesses erroneously devote most of their time, money and energy here, and pay little attention to the other 2 ½!

2. Increasing the Average Transaction ($) Amount: Simply put, if your average transaction amount (one sale) is $10.00 you should be looking for ways to increase it. Do the math and add a dollar or two to every sale and see how much that adds to your bottom line in one year. For example, offer your customers complimentary supplements (add-ons) to your products…

3. Increasing the Average Number of Transactions per Customer: Let’s say your average customer purchases "something" from you twice a month… Now assume that you can provide them with services (e.g. free delivery), add-ons (expanded product line), up-sells, etc. that make them purchase more often… Again, do the math and you’ll be amazed at how quickly the numbers raise.

3.5. Decreasing Customer Churn: Okay, here’s where I differ with my colleagues… I think this one is related to number 3, but not the same. Simply put, churn refers to the number of customers who take their business elsewhere or leave for other reasons.

If your average customer remains your customer for six months, think of how your profits would rise if you kept them longer! This is where it really starts to get fun. Here’s illustration of how you can put numbers 2, 3, and 3.5 ONLY to work…

Example Assumptions:

1. I am a widget retailer

2. I have just finished a widely successful customer acquisition campaign and now have 300 new customers

3. I’ve done my research and, on average, each of my customers:

• Spends $10/sale

• Purchases twice per month

• Stays with my company 6 months

4. Given this scenario, my 300 new customers will purchase $36,000 worth of widgets during their ‘lifetime’ with my company…

300 customers x $10/sale x 2 times/month x 6 months = $36,000**

Now I’ll keep the same formula but change one, or more, of the numbers with the amount of customers remaining constant.

1. 300 customers x $13/sale x 2 times/month x 6 months = $46,800 (23% increase)

2. 300 customers x $10/sale x 3 times/month x 6 months = $54,000 (34% increase)

3. 300 customers x $10/sale x 2 times/month x 8 months = $48,000 (25% increase)

4. 300 customers x $13/sale x 3 times/month x 8 months = $96,000 (267% increase)

** Remember, this is gross, (sale price less materials and labor) not net profit.

This is a very simple, but powerful, model. It clearly illustrates how important it is to find ways to grow your business geometrically with the customers you already have. Even better, it is far less costly, and often more effective to implement these programs than ones designed to acquire new customers.

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