A small leak

How much does an average customer bring to your business over the course of a year? What about a good customer? You know – the ones for whom your products or services make the most difference, and they know it? Now think about how long your relationship with that customer is likely to last, and the amount of revenue he or she will contribute to your business over the life of that relationship.

Money talks


To the uninitiated, it may seem crass to look at a customer and see dollar signs. But there are three very good reasons it pays to be in touch with these numbers:

  1. To understand and more fully appreciate what they take out of their wallets and bring to your bottom line.
  2. To evaluate whether you’re spending more or less than you should to acquire customers.
  3. To focus your efforts so that you reach and retain your best customers.

Marketing analytics firm KISSmetrics used Starbucks as an example and created a visual breakdown that helps demystify the process of calculating Lifetime Value (or “LTV”)*. The firm cites research indicating that it is six or seven times less expensive to keep an existing customer than it is to acquire a new one. So even though you may believe a given customer is happy with you, the more direct the competition for their business, the more imperative it is to dedicate a share of your marketing budget to retention.

Brand Loyalty by Tom Fishburne

Obviously, if you lose that customer, you lose that revenue. If you lose them by making a mistake they won’t forgive, you may lose even more as they share their experience with others. And, of course, some customers are not worth the hassle no matter how much they spend with you. These are things everybody in business learns sooner or later.

But what many small, local businesses seem to struggle with is a less sudden failure to thrive. It’s like a small leak in a tire: You don’t notice it until you’ve lost several pounds of pressure, and that realization never seems to come until you’re in an almighty hurry to get going.

Every local business owner I can think of has a to-do list that never goes away. They’re either responsible for everything, or if they have staff to help then they’re responsible for a different (but not smaller) set of challenges. They are hardworking, nose-to-the-grindstone folk who don’t always like to deal with things outside their core areas of expertise. They tend to not be proactive about things like marketing and retention, but it’s better to keep those efforts going than it is to expect them to work overnight when sales or profits are down.

They’re not just websites — they’re customer attraction portals

It’s late 2014 as I write, and after about 20 or so years of widespread Internet availability, most businesses have accepted the reality that they’ve got to include a web presence in their marketing plans. But beyond that, businesses are all over the map.

Some have embraced the Web for its democratization of commerce. Some have spent big bucks and made bigger fortunes. Others gambled and lost their shirts.

Small, local businesses – some grudgingly – are pretty much on the web. But as I talk to business owners in my area, only a handful see their websites as the marketing asset – or liability – that they are. The scary thing about that lack of perspective is that customer acquisition usually begins (or ends, as the case may be) with their website.

Nah…couldn’t be the website

Last week I spoke with a prospective client who, though he’d reached out to me – a web consultant – about his site, was also dismissive of his website’s importance because, he said, 90% of his business came through other channels.

The man was an attorney who had put his site together himself when he first set up his practice several years ago. It wasn’t the worst I’ve seen, but it also wasn’t a site that would attract someone with a potential Lifetime Value in the thousands.

After he mentioned the high percentage of clients who came to him via other channels, I asked him (somewhat tongue-in-cheek) why he was considering spending the money to have his site redone if it didn’t matter that much. It took a little more back and forth to get it out of him, but he finally agreed that it didn’t make him look like the professional he was.

Master the mix

Mix Master Mike at Brixton Academy - 05/09/07
Beastie Boys’ Mix Master Mike
Photo credit: Wikipedia

Some local businesses spend amounts in underperforming advertising channels that, given their total marketing budgets, are pretty significant. The optimum mix of marketing channels will be a little different for every business, but it’s safe to say the ROI of each channel must be continually evaluated.

One business owner told me she spent, annually, an amount equal to the cost of a small website to advertise in a local print publication whose readership and quality have declined since she began with them several years ago. To be clear, it’s not that print advertising is a bad proposition in every situation – just that it’s got to be evaluated, and it had better work hand-in-hand with your website.

Reach out where your best clients are likely to pay attention. Don’t just keep doing what you’ve always done. Find the mix of channels that works for you, and make sure your website draws in the good prospects those efforts attract. If it doesn’t, and you agree it should, let’s work on it.

* Note: Since this post was originally published, Neil Patel purchased KISSmetrics and redirected all its traffic to his blog’s main page. KISSmetrics’ excellent research on customer LTV, along with a great infographic, can still be accessed via the Internet Archive. I’ve updated this post to link to it there.