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How much should you spend to acquire a new customer?-------------------------------------------- Bob Bly's Direct Response Letter:Resources, ideas, and tips for improving response to business-to-business, high-tech, industrial, Internet, and direct marketing. October, 2003 -------------------------------------------- You are getting this e-mail because you subscribed to it on www.bly.com or because you are one of Bob’s clients, prospects, seminar attendees, or book buyers. If you would prefer not to receive further e-mails of this type, go to www.bly.com, enter your e-mail address, and hit Unsubscribe. -------------------------------------------- BOOK OF THE MONTH Financial Reckoning Day: Surviving the Soft Depress of the 21st CenturyBy Bill Bonner, Addison Wiggin *** Just released and already at Best-Seller: NYTimes *** Best Seller: WSJ *** "...The hazards of democratic consumer capitalism and the financial follies of history suggest that depressions are not necessarily a thing of the past. In fact, they're almost certain to play a role in our future. Which is why, here in the present, we find CNBC and the financial media can be hazardous to your wealth!..." "...a powerful and insightful vision..." - Martin Weiss, author of best-selling Crash Profits To order, click on the link below: http://www.amazon.com/exec/obidos/tg/detail/-/0471449733/qid=1065011377/sr=1-1/ref=sr_1_1/103-5368194-5956626?v=glance&s=books -------------------------------------------- OUTMARKET YOUR COMPETITIORS BY KNOWING WHAT A NEW CUSTOMER IS WORTH To determine how much they can afford to spend to get a new customer, many marketers base that figure on the average size of the first order. Therefore, if the front-end product or service is $500, they won’t spend anywhere near that to acquire the customer, for fear of operating at break-even or even a loss. If they want to double their money on the promotion, the most they’ll spend to make the sale is $250. But savvy marketers know that the amount of money you can spend to acquire a new customer should be based on the customer's lifetime value, not just the revenue from the first order. Lifetime value refers to how much money your customer is likely to spend with you during the period he remains a customer of your business. For instance, if the average unit of sale is $500, the average number of purchases per year is two, and the average customer remains a customer for 5 years, the lifetime customer value is $500 X 2 X 5 = $5,000. Based on the average lifetime value, you can see where it would in fact be worth spending $500 to acquire a new customer. The business owner who understands lifetime customer value as it relates to customer acquisition has a tremendous advantage: He is willing to spend more to acquire new business, because he knows its true value. Example: A company selling books to corporate librarians asked me to devise a marketing campaign to get new corporate accounts to start ordering books from them. I asked the owner what he would be willing to spend to get a new account. He said about $300. Forget advertising, I advised. Just open up an account for every company you want as a customer – and put $300 in it! Send each prospect a personal letter telling them they already have an account with you -- and that it contains $300 they can use at any time this year. Instead of a sales or marketing campaign, my client gave the money he would have spent to generate leads and makes sales calls directly to his key prospects, so they could try the service at no cost. It worked like a charm! Today online trading services use the same tactic. They send you a letter telling you they have opened an account for you with $75 or so in it. You get the money when you do your first trade. Need to stimulate business? Calculate lifetime customer value, decide what percentage of that amount you want to spend on acquiring new customers (10% is a common figure), and basically just give potential customers the money in exchange for trying your product or service. -------------------------------------------- HOW MUCH SHOULD YOU PAY FOR "PAY-PER-CLICK"? Dana Todd, executive VP of SiteLabs, uses this formula: Break-even cost-per-click = average gross profit X average conversion ratio If your gross profit is $5 and your average conversion rate is 2%, then $5 X .02 = $0.10. Maximum you should pay for pay-per-click: 10 cents a name. Source: Internet Marketing Report, 9/30/03, p. 2. -------------------------------------------- READ THIS BEFORE YOU PUT MORE LINKS ON YOUR SITE A reader writes: "You state you have never heard of someone telling another site operator not toput up a link, and you mention that there's some question as to whether a site owner needs permission to do so. I'm here to tell you it's better to ask!" "On the privacy page of my Web site I put up a small sidebar about being careful with confidential information. I included a link to a national organization that educates consumers on privacy rights. Out of courtesy, I e-mailed the organization to request permission. Let's just say when I received their response 6 weeks later, it was not exactly the answer I expected. I removed the link. Just something to consider..." Source: L. Carpenter, www.topdrawerinkcorp.com --------------------------------------------IS PRINT DEAD? NOT YET! Mutual fund CDC Nvest has stopped sending quarterly statements to its investors online -- and is now sending printed statements through the U.S. Postal Service. "E-Delivery has not been as popular with shareholders as we had anticipated when launching it," the fund report. More proof that print is not dead, and that not every communication should be online. --------------------------------------------BUT FAX MARKETING MAY BE DEAD – OR AT LEAST BADLY WOUNDED Yikes! Starting in 2005, new FCC regulations will make it illegal to send a customer an order form, registration form, renewal notice, ad, reminder, announcement, or any other marketing effort by fax unless you first get the customer’s permission to do so first, in writing. What do you think? Is the FCC protecting consumers from having their fax paper wasted with unsolicited promotions? Or are they unfairly interfering with your business’s ability to communicate quickly, conveniently, and cost-effectively with your customers? You can e-mail me your opinion at rwbly@bly.comFor details on the new FCC ruling, click on the link below: http://www.asaenet.org/publicpolicy/FCC_Fax_Rules Source: The Newsletter on Newsletters -------------------------------------------- AND THE NEWS ISN’T GOOD FOR TELEMARKETERS, EITHER After the National Do Not Call list was knocked down in court, President Bush quickly signed it into law. Companies who make telemarketing calls to individuals registered on the National Do Not Call List face fines of up to $11,000 for each violation. If you call 100 prospects without checking to see if they are on the list, you could be facing $1.1 million in penalties! TeleBlock(r) offers a do-not-call blocking system that automatically screens and blacks outbound calls in real-time. Calls are screened against federal, state, in-house, and third-party do-not-call lists. For more information call TeleBlock toll-free at 866-556-8860 or click on: http://www.callcompliance.com -------------------------------------------- BOB’S NEW BOOK: "CAREERS FOR WRITERS, SECOND EDITION" VGM Career Books recently released the revised and updated edition of my book, "Careers for Writers & Others Who Have a Way With Words." If you want to start or jump-start your writing career, this book offers plenty of career opportunities for writers to make that dream come true. Order now and get 20% off the cover price. Just click on the link below: http://www.amazon.com/exec/obidos/tg/detail/-/007140600X/qid=1048704295/sr=1-2/ref=sr_1_2/002-6839593-2717666?v=glance&s=books -------------------------------------------- UPCOMING SPEAKING ENGAGEMENTS You can hear me give my presentation, "The World’s Best-Kept Copywriting Secrets," live at the Folio show in New York City, October 27, 2003. To register call 800-927-5007 or visit http://www.folioshow.com And with Steve Roberts of Edith Roman Associates and Michelle Feit of ePost Direct, I will be giving a talk "The TCD (Timing, Copy and Design) Formula for Email Marketing Success" at the DMA Annual Conference, Orlando, Florida, Tuesday 10/14/03, 10:30 - 11:45 am. For more information, visit http://www.the-dma.org -------------------------------------------- 60-SECOND COMMERCIAL FROM FERN DICKEY, OFFICE MANAGER: Bob is available on a limited basis for copywriting of direct mail packages, sales letters, brochures, white papers, ads, e-mail marketing campaigns, PR materials, and Web pages. We recommend you call for a FREE copy of our updated Copywriting Information Kit. Just let us know your industry and the type of copy you’re interested in seeing (ads, mailings, etc.), and if Bob is available to take your assignment, we’ll tailor a package of recent samples to fit your requirements. Call Fern Dickey at 201-797-8105 or e-mail dickeybf@aol.com. -------------------------------------------- Bob Bly Copywriter/Consultant 22 E. Quackenbush Ave. Dumont, NJ 07628www.bly.comrwbly@bly.com phone 201-385-1220 fax 201-385-1138 --------------------------------------------
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