I had a client recently tell me that one of his mature declining businesses needed to be resurrected. In reality, the market dynamics were all running against this decision. The product line had run its useful course as substitutes were becoming more important to the end user. Competitors were dropping pricing to maintain share and customers were feeding the frenzy by insisting on the lowest priced alternative. This is just one example of many I can site. I’m sure you have your own stories you can tell. It isn’t a good position to be in.
Now you are going to find out the best way to locate a target market of expected customers so you aren’t wasting valuable resources on blitz advertising.
Thus, both questions you must ask yourself are:
- What do folks actually need to purchase from me?
- What merchandises that are associated are they purchasing?
When you figure this out you’ll understand who’s predisposed to buy your products/services. Following that, you find other companies with exactly the same customer base.
The fundamental theory is this:
You need to seek out present companies that have the customer profile that you’re seeking to promote your products/services to.
Because of this, you’ve got an audience to market to and they create an additional value out of their present base.
Then strike up a relationship with those business owners to work out an incentive for customers to purchase from both businesses.
As a result, you have an audience to market to and they generate an added value from their current base.
How do you figure out this? There’s an excellent formula.
LV = (P x F) x N – MC
Here’s what it all means:
- LV is the life time value of a customer
- P is the typical profit margin from every sale
- F is the amount of times each year, a customer purchases
- N is the amount of years customers remain with you
- MC is the marketing cost per customer (total costs/number of customers)
You’ll understand just how much of an incentive you’ll be able to provide to a small business to help bring new customers, knowing how much you really should spend to bring a fresh customer.
Here’s your step by step procedure:
- Locate businesses who already possess the customer base you are seeking.
- Negotiate an incentive to allow them to share that customer base alongside you.
- Concentrate your advertising resources to this group of customers that are predisposed.