You’re Not Spending Enough

keys

Knowing your numbers in business is absolutely critical if you’re ever going to achieve super success and one of the most important numbers to know is your cost per lead and cost per sale. In other words, how much are you spending to generate a lead and how much are you spending to generate a sale?

If you don’t know those numbers then you’re in a position of massive weakness because it means you’ll be making marketing decisions based on less than ideal criteria like, for instance, gut feel; a salesman’s just rung you; it’s what we’ve always done, etc. Once you know, however, what you’re prepared to spend to get a lead and, also what you’re prepared to invest to get a sale, it adds a  whole new dimension to your thinking and, in the majority of cases opens up all sorts of opportunity.

Your spend doesn’t have to come in the form of direct advertising or marketing – and neither does it have to constitute money off . There are other smart things you can do to invest wisely in  getting a customer and one of them was brought to my attention recently by our 2013 Employee of the Year, new boy Mike Thomas who joined my team in January last year. Mike made quite an impact in his first 12 months with us (hence the award) and recently, on the back of a pay rise, he set out to buy a new car.

Now, Mike’s a smart guy and he’s researched pretty much every brand of car that there is available, but one company, Volkswagen, made it really easy for him to buy from them because they  presented him with a really good offer. Here’s how they did it: For young drivers looking to buy a car, price is a significant factor and because of this, the small car market is heavily commoditised.

In other words, 95% of manufacturers price their cars very similarly to their competition. Slashing prices isn’t really an option because they’d lose money, which isn’t good for business. Is it?

Volkswagen disagree.

You see, Volkswagen understand the average lifetime value of a customer and they know how to keep customers. They know that once a driver has driven any particular brand of car for a number of years they’re much more likely to buy from the same manufacturer next time round. However, recently, they’ve taken this to the extreme and run a really smart off er on one particular car – the long established VW Polo.

Here’s their offer:

£1,000 towards your deposit PLUS ONE YEAR’S FREE INSURANCE.

Now that’s a pretty good offer but where they’ve chosen to place this offer is particularly clever. You see, they know that younger drivers in general drive smaller cars. Smaller cars are cheaper to  run, cheaper to insure, etc. And they figured if they can get lots of people driving their cars at a young age, the potential for those drivers to buy three or four or even five Volkswagens over the next 15 years is pretty high – as long as they do the right things and look after the customers.

So why is this offer so good? Well, think about it. You’re young and you’d really like a nice new car. Insurance is sky high and whilst you’re earning decent money so you can afford the monthly payments, but the idea of a big deposit is really holding you back.

University fees just won’t go away but you really want a new car.

That’s their market. By constructing their off er accordingly, Volkswagen have eff ectively joined the conversation that’s already going on in their prospect’s mind and they’ve hit them right  between the eyes with an offer that addresses the two most significant things to that particular target market – a significant contribution towards their deposit and the insurance taken care of for the first year.

So why should Volkswagen’s car marketing techniques matter to you?

Well, if you’re thinking that this article is all about selling cars, then you need to snap out of it. Great offers are there to be created in every single business. You see, it’s all about acquiring a  customer.

Volkswagen really know their numbers so can afford to make this great offer (and potentially lose a bit of money on the initial deal) because they know that these customers will be back to spend again. They’ve got a good product, the dealer network, broadly speaking offer high levels of service and the young guys that come in now with a discounted Polo and a year’s free insurance will be back in the years to come and they’ll move up the model range to Golfs, and beyond.

My main point here though is just to reinforce that it is okay to go “underwater” or lose money on the initial sale – providing you know your numbers. Most business owners in your sector get a  customer to make a sale. But the super smart, super successful ones make a sale to get a customer – and there’s a massive difference, which is what I mean by my headline here: you’re almost  certainly not spending enough to get customers and the longterm price you’re paying for that in your business is significant.