One common problem that many new affiliate marketers have is to find a lucrative market. Usually, highly experienced affiliate marketers know how to conduct research and spot opportunities on the Internet. This ability doesn't come overnight. Expert marketers spend lots of time testing things out, and honing their ability to find good markets.
One quick way to pinpoint a lucrative market, is through affiliate marketing. Make full use of affiliate marketing to promote products that you don't own. If a sale is made, you make a percentage of the sale. If the traffic that you send doesn't convert, you earn nothing.
You don't risk much when you get involved with affiliate marketing. You usually start by generating traffic for the offer. All it takes is a hundred visitors or so, and you have all the data you need to make an assessment for the offer you are promoting.
This is the best way to test a market. You don't need to spend a single cent on product development. Once you find a strong offer, make plans to penetrate the market.
It all begins with affiliate marketing. You can test as many markets as you like, using similar methods. The results will be revealed to you in a matter of days.
Once you know which markets are profitable, just place more emphasis on those businesses. Repeat the cycle again to make more profits.
To scale your internet business, you may wish to build a list. Sounds simple enough? That's because it is a simple business model.
Here is an example. Let's say you start off with just one product, and you sell it for $47. When you make a sale, you earn 47 bucks. If you make 10 sales, you make $470. To make more money, you have to acquire more customers. If you don't, you can't grow your business.
Make a quick assumption - you don't get any more new customers. Can you continue to make more money from your online ventures? You can work on developing more products to sell to your customers. That means selling more to the same customer. That greatly increases the customer lifetime value.
The lifetime value of a customer is the amount of money that he spends with you. For instance, an individual who spends $10,000 with you over the next 10 years has a lifetime value of $10,000.
Now the business gets more exciting. For every customer you acquire, you earn $10,000. How much can you afford to spend on marketing?
Affiliate marketers need to do this more often. A sale is made, and a little bit of money is earned, but the customer has been neglected. Try to serve just one customer over and over again. It's much easier to sell to an existing customer than to sell to a completely new customer.
Use a landing page to capture the email addresses so that you can contact your customers again. You may very well be making 10 times what you are making now.
Let us start our discussion by estimating The Lifetime Cash Receipts Value of a new customer for your business.
We need to use a two step procedure.
Step #1: Estimate, on average, how much a new customer will spend with you for one year.
Step #2: Estimate, on average, how many years a new customer will stay with your business firm.
Let us use an example to make the calculation.
We will use Starbucks Coffee Shops to illustrate the calculations involved.
Let us say the typical customer spends $5.00 per trip and she comes in four times per week, or spends $20.00 per week. Also, she comes in fifty (50) weeks per year. Accordingly, she spends $1,000 per year ($5.00 times 4 times 50).
We now know that a new customer for Starbucks will spend $1,000 in cash for her coffee. That is the first step.
The second step is to estimate how many years she will continue to visit Starbucks. That answer is twenty-five (25) years.
We know the life-time cash receipts value of a new customer is $25,000.
Now, you understand why Starbuck employees treat each customer like he or she is like a king or queen.
Note: The author simply used Starbucks as an example. I am a customer and simply used my best guess. The actual number is known only by Starbucks management.
The challenge is for you to estimate The Lifetime Cash Receipts Value of a new customer for your business.
If you are an internet based business, what is the cash receipts value of one new customer for your business?
If you have a home-based business model, what is the magical number?
The cash value will be different for each industry, but the concept is valid for each different industry.
And once you know the life-time value you can use it to make advertising, selling, and marketing decisions.
How much are you willing to spend to acquire a new customer?
How much will your competitor spend to take a customer away from you?
If you lose a customer, for whatever reason, what does it cost your business in lost profits?
How much do you lose the first year?
How much do you lose over the life of the customer?
Let us go back to the Starbucks example to calculate the lost profits. Let us assume that the typical customer makes a 50% contribution to overhead and profits.
We use this percent and multiply times the first year sales estimate. We said earlier that the typical customer would spend $1,000 per year. By multiplying 50% times $1,000 we arrive at an estimate of $500 per year. In other words, we lose $500 in contribution to overhead and profits for each customer lost.
If we lose 10 customers to the competition, then we have lost $5,000 in contribution to overhead and profits. That number is arrived at by multiplying 10 times the $500 per customer.
Also, if we lose 100 customers, then the lost profits become $50,000 per year. Clearly, it is very expensive to lose a customer for whatever reason.
What about the lost profits over the life of the customer?
Earlier in our discussion, we used twenty-five (25) years as the useful life of a customer.
We would multiply the $500 per year in lost profits times 25 years, which would be $12,500 per year. In my opinion, losing $500 per year per customer for twenty-five (25) years is a substantial loss of profits.
And when a customer is lost due to poor customer service by an employee, it is almost unacceptable to the owner/management team.
Small business owners, home based entrepreneurs and online business owners are always looking for ways to improve their business profits. By calculating the Lifetime Value of a new customer, then the owner/entrepreneur can start making better decisions about sales and marketing activities, especially customer acquisition and retention.
And I will conclude this article by asking a question.
What is your plan to calculate the life-time value of a new customer for your business?
Both Gen Wright & David Wiley are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.