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Russel Nouveau

Russel's Rant on all things business. How to do better in your small business, from the perspective of a career marketer, brand architect and website innovator.

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Buying Customers

Posted by on in Improving the game of business
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Jay Abraham, Dan Kennedy and Mal Emery have all convinced me and sold me on this subject. It really is worth buying customers, after you do the math. (In direct marketing we call it the "Allowable") Calculate life time value of a customer- and decide if you’d spend 10%, 20% or even 30% of that value to attract a new client.

There's a lot of hype out there about buying customers. But in a sense we’re all doing it in one way or another. Take the humble lawn mowing service buying a competitor’s lawn mower round, to people actually investing thousands of  dollars each week in advertising. Most businesses attempt to buy customers in various ways.

I want to consider a fresh new way.

Consider giving away a product or service - something that is really quite valuable to the right audience, a qualified audience and audience that’s going to come back to you for more and more services.

Do this first

First  work out the lifetime value of the customer to you. Do this by looking at the average client, and asking:

  1. How long do they stay with you?
  2.  How much they spend over those years?
  3. Looking at your GP, work out what the net net profit from an individual client would be

For example. In my business a typical client will spend $15,000 over 3 years, making me $10,000. So would I spend $500 to make $10,000? Absolutely

Would I spend $2,000 to make $10,000… Yes.

Of course it depends on your business cash flow and lots of other factors. I'm going to go in low and say if you budget 10% of what your new clients are worth to you, that could equate to giving away a small product or service in order to attract them.


As Mal Emery would say: Give up part of a profit you would never have had, in order to gain that profit.

Don’t take any short cuts. Don't give away a crap product to start your relationship with a new customer. It must be high quality and representative of what they can expect from you.

Really deliver on the first service -excellent service, timing and product quality.

I know my dentist really struggled with this idea because he'd been working all these years with the notion of $50 as an allowable amount to attract a customer. I think yellow pages convinced him of this number, in order to justify display advertising. Graham has now calculated the lifetime value of his customers and was surprised. It’s actually $2,700. That's right, each new dental patient is worth $2,700 to the dentist based on how long they stay and what they spend on average. So $50 is on the low side. He can now see that gifting the initial exam and x-rays, maybe a huge $270 value to give away, but may create many new customers who stay with him long term.


If you’d like a hand with your own marketing roll out plan, contact Russel Nouveau on 0414 301 717



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Guest Saturday, 21 April 2018
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