Need More Customers? You Do Not Try Advertising

Every successful small business owner spends thousands every year on advertising. However most people may not be able to tell you how well their advertising is working, how many customers they are getting using various advertising media and what is the real cost of customer acquisition. Even more importantly, most business owners may blink at you if asked what is the real cost of customer retention.

If advertising dollar is not track able to the newly acquired or retained customers then it is a wasted dollar. If you do not have any knowledge of advertising whatsoever than you should remember one thing: AIDA. Where A is for attention, I for interest, D for desire and A for action. Whether you are advertising or promoting (or marketing) your product or service, your offer to the customer should be interesting enough to arouse a desire to take an action. It should focus on the benefits why your customer should buy your product and not from your competition. Good advertising often starts with 'Why' or 'How to...' and bad advertising often with name of he company, its history, and product... yawn... boring!

However it is expensive to get new customers via the advertising route. If you monitor closely or ask your accounts department for a complete breakdown then you may find that the new customers acquired via advertising are not as profitable as your existing customers, or the customers acquired via referrals. Does it sound obvious? Then why more businesses do not do it? Why owners are rushing to their phones every week to place an advertisement in their local paper, radio Internet, or whatever happens to be their medium of choice?

This is because calculating customer acquisition costs are often not as straightforward. As a rule of thumb, see how much you spend in a given quarter (or during the year) on average on advertising, add the cost of replying to potential customer inquiries including staff time and then divide this figure with the number of new customers acquired during this period. If you can track how much was sold to these customers then you will find out the profit per new customer at the cost of their acquisition.

All industries are different. But to take an example, credit card industry is prepared to spend in excess of $100 to acquire each new customer. Debt or mortgage companies happily pay $10-$40 per click to Goggle for sending interested people to their websites. These sums are not realistic for small businesses to pay out because they do not operate in hyper competitive industries like these. Although costs are relative to profits, this example just illustrates the point how much advertising can cost to attract one customer. How much a company will make from these customers in the long run is another story.

My point is: why companies do not use creative strategies to attract customers, rather than acquiring them? Is it that hard to entice people in to your fold via their friends or family members? I know many businesses that use referral systems extensively to attract a constant stream of new customers. They also use the same methods to sell more to the existing customers. How do they do that? They offer customer more than what he would hope to get from competitors.

Have you considered handing out incentives to your customers in exchange for introductions to their friends who may be interested in your services? Just try this. You will be amazed just how many people will introduce you to new prospects in exchange of a gift. Leads passed on by willing and happy customers of their own friends is considered gold dust in marketing circles. Then you just pick up the phone, have a friendly chat with the friend and offer an inducement, which could be a discount, upgrade, or whatever is perceived highly by the friend. He is more than likely to try out your product because his friend is recommending it. And the cost of a new customer: None! This is the kind of publicity most companies can not buy.

Things like giving out an incentive that costs you next to nothing but is perceived highly by the customer are known to work hugely in favor of businesses. Customers happily let their friends know about your offers too, increasing the number of customers walking through your door more than ever before. Such give away incentives, e.g. vacations to exotic locations make good candidate. I personally know businesses that have created such a buzz that they saw their sales increase by almost one third just by using this one tactic.

So what is the moral? You do not need advertising to attract new customers. You can steal them from under the nose of your competitors just by being creative.