A key factor in any size business...

Hi Mike,

There is a poster who visits this and other boards and he calls himself "a dumb o' dirt farmer" or something like that.

Well, I am "a dumb o' used automotive parts broker". I have been in business since 1989.
I broker used automotive parts both online and offline. (Primarily serving customers through out the states of Virginia, West Virginia, Kentucky, and Tennessee).

My question to you is: What steps can one take to determine....."How much one needs to spend on marketing?"

Warmest Regards,

Raymond

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> Not too long ago I put on a marketing
> seminar for several people looking to start
> a business in the county in which I reside.

> One of the main questions I asked them was:

> "How much do you need to spend on
> marketing?"

> The puzzled looks stared me in the face so I
> rephrased the question:

> "How much do you figure it will cost
> you in money/time to create one sale through
> your marketing efforts?"

> Again...blank stares.

> Unusual?

> Not hardly. As one of my 'occupations' I
> work as a Business Specialist for my part of
> the state, which covers about 1,300 square
> miles and 2,000 businesses. I help
> businesses with marketing issues,
> operational issues and funding issues. And I
> will guarantee you the number of businesses
> out there (both new and established) that
> even have a rough idea of what it costs them
> to acquire one new customer is less than 5%.
> Possibly less than 1%.

> From my point of view having been involved
> in numerous businesses over the last 15
> years as an employee, owner or consultant,
> the cost to acquire one customer is the main
> determining factor IF and HOW successful
> (i.e. profitable) a business will be. But
> most businesses have no idea what it costs
> them to acquire a customer.

> If you own a restaraunt and it's costing you
> $100 to bring in one new customer and that
> customer represents $50 in net profits over
> the course of your relationship then you'll
> be out of business...soon.

> If you have an Internet related business and
> it takes 4 hours of work to acquire one new
> customer who represents $20 in net profits
> over the course of your relationship, is
> that making you money?

> The trouble is if you don't have an idea of
> what your customer acquisitions costs are
> you are flying blind. And blind pilots
> eventually crash.

> Again it doesn't matter what kind of
> business you're in...customer acquistion
> costs need to be known and understood in
> order for you to achieve maximum profit.

> Do you think McDonalds knows what its
> customer acquisition costs are? How about
> Wal-Mart?

> The way to make a small business into a
> large one is to find out what your customer
> acquisitions costs are in a small, testable
> and measurable area and if the acquisitions
> costs make sense, roll the program out into
> a larger arena.

> That's why if size is important to you, you
> need to pick business opportunities that
> aren't limited geographically or by some
> other limiting factor like say the
> availability of merchandise.

> In this forum we tend to talk about other
> things like motivation, which is much
> 'sexier' and perhaps more interesting than
> 'customer acquisition costs' it pales in
> comparison in overall business success (in
> my opinion).

> What are your customer acquisition costs?

> Take care,

> Mike Winicki