Prospecting Done Right
Long-term Strategies for Profitable Customer Acquisition
Prospecting for new customers is risky business. It’s especially risky if you don’t evaluate your prospecting efforts thoroughly. Slice the numbers one way, and you won’t grow your business as quickly. Slice the numbers another way, and you may not yield a profit from new customers.
Evaluating your prospecting efforts accurately and with precision requires a minimum of five steps:
Step #1: Identify your tolerance level for time between acquisition and breakeven.
Step #2: Develop a long-term value (LTV) model.
Step #3: Properly allocate unknown order sources back to prospecting.
Step #4: Use the LTV of your customer to determine where to draw a line in the sand for your future circulation profitability.
Step #5: Identify ways to increase response from mailing lists performing below par.
Before you can start down this five-step path, you have to gather some information.
It’s vital that you know how every sales dollar your business generates is allocated. Every sales dollar must cover costs and yield a contribution to profit. But in the case of prospecting, it is likely you must identify the maximum loss you can accept from a newly acquired customer, with the projection that you will recover those losses in future sales.
Broadly speaking, every sales dollar should be allocated to cover a few categories:
Cost of goods sold (COGS)—all costs related to your product or service.
Fulfillment—all operational costs required to deliver the product or service to your customer.
Overhead—salaries, rent, utilities and dozens of other items that must be accounted for somewhere.
Contribution to profit and marketing—the amount remaining after COGS, fulfillment and overhead are deducted from your sales dollar, which goes to: 1) Marketing—all cost related to promoting your product, and 2) Profit—what is left over after all cost obligations have been paid.
Reinventing Direct is for the direct marketer seeking guidance in the evolving world of online marketing. Gary Hennerberg is a mind code marketing strategist, based on the template from his new book, "Crack the Customer Mind Code." He is recognized as a leading direct marketing consultant and copywriter. He weaves in how to identify a unique selling proposition to position, or reposition, products and services using online and offline marketing approaches, and copywriting sales techniques. He is sought-after for his integration of direct mail, catalogs, email marketing, websites, content marketing, search marketing, retargeting and more. His identification of USPs and copywriting for clients has resulted in sales increases of 15 percent, 35 percent, and even as high as 60 percent. Today he integrates both online and offline media strategies, and proven copywriting techniques, to get clients results. Email him or follow Gary on LinkedIn. Co-authoring this blog is Perry Alexander of ACM Initiatives. Follow Perry on LinkedIn.