Last week we changed from Lifetime Value of a Customer to Acquisition Cost and how it affects profit.  Today I want to still focus on Acquisition Cost but show how it is interwoven with Lifetime Value.  You see, if you’re a true business owner, you know you can’t work on one without working on and having an effect on the other.  Now, some of what I have to say this week is going to come across as harsh.  Particularly to the job holders and the hobbyists. You’re going to be a bit lost in this, so I apologize.

You see, if you go to networking groups because “All I need is leads man” is your mantra, you will live a life of disappointment. You may get leads but your conversion rate will be low and your profit per customer/client will be even lower.  Networking is about relationships, business relationships and referring people with needs to one another.  That’s not a lead.  You can go to Sales Genie and get leads and never have to leave the house, you’ll save on gas and probably spend about the same dollars.  Networking is also about alliances – where businesses help and support and showcase each other and referrals flow to all involved.  Remember, conversion rate on referrals tends to be high, meaning more customers/clients per marketing dollar spent which drives down Acquisition Cost which drives up profit per customer.  Folks, it ain’t higher math we’re dealing with.  Pure arithmetic.

But how does Lifetime Value enter this?  Well, if Kay puts an ad on TV and spends $500 for it, gets 3 customers from it who each spend $100 and her profit from each totals $50, has Kay made any money?  But what if Kay also institutes some systems to keep these customers coming back and each time they spend $100 each and they are so happy each one refers 2 friends who come in and spend $100 each?  Is she on her way to making money now?  It’s Lifetime Value.  But you have to have a base of reference to see if you’re making any profit.  That’s Acquisition Cost.

So, the next time you go to that big old “Business After Hours”, why are you there? What’s your expected outcome? If it’s to work on and solidify business relationships, great.  Right idea.  If “I’m there for leads man, I need leads”, how’s that net profit line working out for you these days?????