These days businesses spend a lot of time, effort and money trying to grow their business. Most often, they spend hours creating content for social media and with organic reach at two percent or lower, it barely is seen by your current customers, let alone reaching new potential customers.
How about online ads? I’ve seen campaigns that had a million plus impressions result in just 6 responses/orders, of which just one person converted into a regular customer.
Then there are the expenses of renting a mailing list, printing postcards, mailing/delivery costs, you carpet bomb entire markets spending thousands of dollars, what kind of response rate can you reasonably expect? My clients have shared some of their numbers and they show that an average response rate using postcard mailings is just two percent.
Wow. Doesn’t look like it’s a profitable endeavor to be a marketing consultant promoting advertising, does it? Who wants to do any advertising with numbers that look bad? Well, actually, marketing looks like a pretty good business to get into with more and more competitors popping up every day and getting into it.
The real reason there are so many marketers popping up these days is there are a lot of businesses desperate for customers and sales. Plus many of these business owners don’t know if the marketing they are doing or paying to have done for them is working. Many don’t even have a definition of what ‘working’ even is.
So, let’s start there. Why don’t we set one definition of marketing that works as: achieving a goal.
If a direct mail campaign generates a 2 percent response rate, which results in 5,000 postcards being sent out and it’s generated 100 orders of an average after discount dollars of $21.00 per order, that campaign generated revenues of $2,100.
If the goal was to generate a response rate of 2 percent, the goal was accomplished.
But, if the goal was to generate 50 new customers and 80 of the 100 orders generated by the direct mail campaign were existing customers you already had in your customer database, then, the campaign failed to achieve the goal.
Perhaps the goal is to achieve a return on ad spend (ROAS). If it cost you one dollar per postcard for list rental, postcard printing costs and delivery, the campaign costs $5,000. Again, let’s use a response rate of 2 percent generating 100 orders with an after-discount average of $21.00 per order, generating $2,100 in sales. Revenue divided by Ad Spend gives a result of 42 percent. If your goal was to recover just the cost of your advertising expense, the direct mail campaign didn’t even cover half of what it cost you to produce it and get it on the street, not to mention what it cost you in plant processing charges to produce the finished goods.
Setting goals and measuring results quickly separates those who profess to do from those who do. Plus, monitoring results quickly shows you where you really need to invest your time, money and effort to grow your business.
Let’s go back to the process of prospecting for new customers. It doesn’t matter if it’s a social media campaign, a search ad campaign, or a direct mail campaign. The campaign is sent out and begins to generate customers with orders. As customers and their orders are processed, many businesses make a fatal mistake believing that every new customer that walks in the door automatically becomes a customer for life, returning again and again and again. Unfortunately, it’s not so.
Right off the bat, EVERY customer that picks up an order becomes a free agent as soon as they walk out your door with their clothes. We should never assume that every customer is ours and is going to return. And, the reality is, the number of first-time customers that do return for a second time is not anywhere near 100 percent.
Only 40% of new first-time customers return to make a second visit
That’s a scary number. You worked hard to get those new customers to come in and make their first purchase. You worked at making sure you have great service, high cleaning standards, excellent stain removal skills, perfect pressing, a clean store, friendly staff, convenient hours and 60 percent of your new customers DON’T come back!
Let’s take a look at those new customers that returned for a second visit. Again, you and your team work hard to deliver a flawless experience and deliver clothing care perfection in a bag, the likelihood of those
Customers returning for a third time is just 42%
So, let’s sum up.
You run a marketing campaign to generate new customers. You target 5,000 prospective customers and you have a 2 percent response rate, generating 100 new customers. Of those new customers, 40 customers return for a second time. Of those 40 second time customers, 42 percent, or 17 customers return for a third visit.
Sounds rather depressing, doesn’t it? But hang in there. We’ve reached the tipping point.
By the time a customer has made three purchases from your store, a new shopping habit has been established. A customer has formed a new shopping pattern and the resistance to change has worn down having been replaced with familiarity and expectation. After three visits, the customer tends to seek you out as if on autopilot.
Once a customer makes three purchases, the likelihood of further purchases increases to 70%
After three purchases, you become the service supplier of premier preference, all others become secondary. And, one thing about customers, once a shopping pattern has been established, they don’t change habits easily. But, what it takes to get a customer to switch cleaners is another conversation, study and article entirely, ad for another time.
So, in reality, when we go prospecting for more customers or new customers, we simply can’t just think of getting a customer through the door with an order once, we really must be designing marketing campaigns designed to bring in a customer three or more times. The sooner we get a second and third order, the faster we get customers established in new habits that benefit us with the advantageous position of primacy in our customer’s minds and they seek us out automatically bypassing our competitors entirely.
It’s not about how many new customers you get, its all about the numbers of new customers you keep!