Menu

Cost Per Contact - Lifetime Value of a Client

Advertising can appear in many forms: such examples are press releases, business cards, radio ads, television spots, newspaper ads, direct mailings, or even talks at service clubs, to name just a few. It can cost great sums of money or it can be free. The cost isn’t indicative of the effectiveness. The best advertising is the one that brings a return on investment. As long as it brings in more than it costs, you are doing well.

There is a saying that it usually takes about five contacts with prospective clients before they buy.

 

Some people measure the cost of advertising by taking the number of people that the ad can impact and dividing that total by the cost of placing the ad.

 

For example, let's look at advertising for weddings:

 

Let’s take a newspaper with a circulation of 90,000 and let's say the cost of a one-eight-page ad is $ 500.00.

90,000 / $ 500.00 = .01 cent per contact.

 

or;

 

Let’s imagine mailing a letter to 500 brides at $1.00 each, postage included.

 

500  / $500 = $ 1.00 per contact

 

Based on these examples you would probably say that the cheaper option would be to take the newspaper ad out, wouldn't you? Many adver­tising executives sell on that basis. However, the reality is that this approach is the wrong way to measure effectiveness.

 

Chances are that most of the people reading the newspaper would not be in the market to get wedding photographs. In fact, even if some are, many might pass over the ad. Through the process of elimination, you may get about a .001% return. Such a result would average out to what the letter to about nine brides would cost. Of those nine brides, on average you might book two.

 

On the other hand, with direct mail, the average return is about 3 %, with a result of fifteen respondents. Of these, using the same booking percentage, you would book four weddings. Based on these results, I submit to you that it is more desirable to measure your effectiveness not on how much the cost per contact is, but rather on the success rate. You must calculate what the cost is to get each client in the door.

 

In example  "A" the cost was  $500.00/2  (weddings booked)  =  $250/contact.

 

In example  "B” the cost was  $500.00/4  (weddings booked)  = $125/contact.

 

Generally photographers don't figure out what the cost per contact and the cost per client are. We can take this a step further by looking at the "Lifetime Value" of the client. How much will the clients spend at the studio over a lifetime?  If you think they will spend $500, $400, $200, or even $100 a year for the next 15 years, the dollars add up in a hurry.

 

Many photographers balk at giving a free sitting and 8x10 with a hard cost of maybe $15.00, because it lowers their prestige value. However, if you think that the client may spend $1500 over 15 years, a $15 investment is peanuts. That's a 10,000% return on your money. You can't get that in the bank.

 

Knowing that it normally takes five contacts per client before they are sold, a businessperson should realize that the effort of taking extra good care of those clients really pays off. Moreover, it really pays to research, test, and track each form of advertising that you do.

Chuck Groot’s CPA, MPA, MBA credentials as an author, teacher, business coach and entrepreneur are noteworthy. His clients credit their success to his uncanny ability to get right to the root of any challenge that they put in front of him.  He credits his success to his clients and their willingness to being open to new ideas and desire in pursuit of excellence. 

As an entrepreneur, his enthusiasm and innovative approach have garnered him both professional success and the recognition of his peers. But his greatest delight is being able to share these skills with others and enabling them to be successful on their own.

 

chuckggroot@gmail.com

 

http://www.chuckgroot.com

 

I would really like to hear what you think about this article. Drop me a line and let me know how you feel about it?

 

Guestbook
Please add a comment below
 

You have got superb info on this site.

My homepage {link://bd-server.com/user/StarMackinolty/}for more information{/Link}

Keep up the excellent job and delivering in the crowd!

Here is my weblog: {link://www.bluegreenforums.com/index.phpp=/discussion/348/best-reasons-to-choose-a-handheld-back-massager?new=1}visit website{/Link}

Displaying all 3 comments