How to small business secrets small business secrets small ... Bonuses/TBB...آ  small business secrets

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  • small business secrets small business secrets small business small business secrets small business secrets small business

    small business secrets small business secrets small business small business secrets small business secrets small business

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    small business secrets small business secrets small business small business secrets small business secrets small business

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    small business secrets small business secrets small business small business secrets small business secrets small business

    small business secrets small business secrets small business small business secrets small business secrets small business

    small business secrets small business secrets small business small business secrets small business secrets small business

    small business secrets small business secrets small business small business secrets small business secrets small business

    Mike Reddy ca Business Development Specialist Co

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    How to

    Slash Your Advertising and Increase Your Profits

  • Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    Page 1 Copyright 2007 Shape Your Business PTY Ltd

    Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    IF I HAD A DOLLAR 3

    CUSTOMER SPENDING CAN REALLY ADD UP 5

    ITS EASY TO OVER INVEST IN MARKETING 6

    WHAT IS CUSTOMER LIFETIME VALUE? 8

    USING CLV TO MAKE MARKETING SPENDING DECISIONS 8

    APPLYING THE CLV METRIC 10

    MARKETING COSTS AND CLV 10

    THE REAL RETURN ON INVESTMENT FROM THE ADVERTISEMENT 11

    USING CLV TO EXPERIMENT WITH ‘WHAT IF’ SCENARIOS 11

    THERE ARE DIFFERENT WAYS TO MEASURE CLV 13

    CHASING VS. RETAINING CUSTOMERS 13

    IMPROVE CUSTOMER SERVICE 14

    USE YOUR CUSTOMER DATABASE TO TARGET MARKET 15

    GET YOUR CUSTOMER’S OPINION 16

    INTRODUCE A LOYALTY SCHEME 17

    GATHERING CUSTOMER INFORMATION 18

    COSTING A LOYALTY MARKETING PROGRAMME 19

    USING CLV ANALYSIS TO ASSESS LOYALTY PROGRAMMES 20

    MANAGING MARKETING CAMPAIGNS FOR ROI 21

  • Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    Page 2 Copyright 2007 Shape Your Business PTY Ltd

    USING CLV TO BENCHMARK CUSTOMER ACQUISITION COST 22

    SEGMENTING CUSTOMERS 23

    PUTTING YOUR MONEY WHERE YOU’LL GET MOST RETURN 24

    GROWING CUSTOMERS THROUGH DIFFERENTIAL SERVICE 25

    FIRE THE LOW PROFITABILITY CUSTOMERS? 25

    NOT SO FAST… 26

    KNOW WHAT YOU ARE DOING 27

    CONCLUSION 27

  • Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    Page 3 Copyright 2007 Shape Your Business PTY Ltd

    If I had a Dollar

    If I had a dollar for every time a client has asked me how much they should commit to advertising!

    Is it 2%? 3%? 5% of turnover?

    Well that depends. It depends on a lot of factors.

    But it’s the wrong question anyway. There is a lot more to gain from asking the question that any business that has been trading for a couple of years or more should be asking.

    Why advertise in the first place? What is the purpose of advertising?

    That might seem a silly question. A question that might come from a person that has never been in business. How can anything be more obvious?

    Yet it’s an answer that could save businesses half of their annual advertising splurge. Half of their annual advertising that could be better spent on growing their business. Or on themselves. The equivalent of 2% or more of their annual turnover available to spend how they wish. Wow.

    It’s all about keeping the end in mind. And surely the end game is to grow the business by increasing sales.

    But more importantly by increasing the bottom line.

    After all, what would be of greater benefit to a business owner. Increasing sales by, say, $100,000 and increasing the bottom line by $10,000. Or by increasing the annual sales by just $30,000 and increasing the bottom line by $15,000?

    A number of owners would suggest the first scenario. For some reason they measure their success by turnover. But the value of the business will be determine more by the profitability and the net cashflow generated from the business rather than the amount of sales.

    And it seems to me that the more money I could make with minimal effort and risk is a lot more appealing!

    So if the main purpose of advertising is to increase sales in order to increase the bottom line, then shouldn’t that be the purpose of the strategy?

  • Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    Page 4 Copyright 2007 Shape Your Business PTY Ltd

    Yet time after time I see business owners commit to advertising in a relentless pursuit for more customers. Any customers will do, as long as they are new to the business. People or other businesses that we have never met before. People we can introduce to our business and hopefully sell something to. And then if we advertise again we can find some more. And some more. And so on. Until one day our businesses are full with new people who want to buy our products.

    And I matters not how we spend it. Or when we spend it. The easier the process the better still.

    It a necessary expense. A bit like paying the electricity bill. Although come to think about it, when we pay the power bill, we know we got the power we paid for. And we know we are getting a certain cover in return for the insurance payments we make. And the accounting fees. And all those other expenses.

    But advertising? Are we sure we got the customers we were hoping to get? And if we don’t, will the advertising medium give us a discount?

    Unlikely.

    Yet we continue to advertise. We keep making it, month after month, year after year. Never sure if it is worth it. If we are achieving the desired goal. Yet we persevere.

    And even when there’s a response, the cost of the advertising could well eat up the profit that those responses will contribute to the business.

    The situation isn’t helped by traditional profit and loss statements showing sales at the top and advertising cluttered with all the other expenses. There is no match. No way of linking the expectation that advertising should be resulting in a specific increase in sales. And there should be.

    With advertising can take up 3%,5% or even a higher percentage of the sales this can make a huge impact on the success of the business.

    And yet the feeling is that customer acquisition is the sole driver of success. And what matters most is to increase revenue by continuously acquiring new one-shot customers.

    This is one of the underlying faults with common small business strategy. It's a sad scenario, but it's also the reality.

    Let me tell you something. It will cost you 5 times more to attract a new customer than it will cost you to bring one of your past customers back to you.

    I don't know you personally, but if you're a smart business owner you'll understand that every cent you invest in advertising is going towards acquiring new customers. You'll also realise that once you've acquired the customers, you just can't afford to let them go.

  • Small Business Secrets - How to Slash Your Advertising and Increase Your Profits

    Page 5 Copyright 2007 Shape Your Business PTY Ltd

    Customer Spending Can Really Add Up

    It’s true that we only see some customers, perhaps many, just that once before they

    disappear. Never to be seen again.

    In business terms their lifetime as a customer is just one transaction.

    So their lifetime value to you as a customer is equal to the profit on that one transaction.

    But there are others, many others when you produce a good product, that keep coming

    back. Time after time.

    Think about that.

    We use the term “lifetime value” to describe the profit that the customer brings to your

    business over the time they elect to regularly deal with you - their effective “lifetime”.

    And the lifetime value accumulates with each return to your business.

    Let’s look at an example.

    A convenience store may have a number of regulars that keep coming back, week after

    week, month after month, year after year. The lifetime value of this sort of customer

    can be substantial.

    Alternatively think about a business who’s team members regularly buy from one

    particular coffee shop for an extended period of time. Think about how much that

    customer is worth to that coffee shop over a number of years.

    Then consider for a moment the cost of initially attracting those customers.

    The cost of the advertising, the time taken dealing with the prospects many of who

    decided to make a purchase elsewhere,