Branding Made Simple

If you’re a small business owner, you’ve heard this advice from the SEO experts a million times over: Blog. Write articles. Create links. Swap links. Make videos. Create lots of pages. Include your keywords. And when all else fails, blog some more. All these actions will drive traffic to your website and make it relevant. For if you're not on the 1^st page of Google you might as well close your doors, right? (only 75% of users never go past the first page of search results.)

No doubt, Google is the new Yellow Pages, and therefore making SEO a part of your online marketing strategy is key to growing your business. According to Marketing Sherpa, 70% of the links search users click on are organic, not paid, which is great news for companies who constantly blog. But guess what? Your competitors are also fighting for that top spot on Google and sometimes they don't fight fair. So, what's the solution? (Spoiler alert: I'm about to state the obvious here.)

Exceptional customer service.

What your customers say about (and how often) is the key to your success as a small business, not SEO. Sure, you have a laundry list of great testimonials on your website, but customers are savvy these days. They don't just want to read what you have to say. They're checking out Yelp, Angie’s Listings and a whole host of places to find out other people are saying about you. That’s why being ranked #1 on Google (or Bing or Yahoo for that matter) isn’t everything. In fact, It's sometimes overrated. Having good SEO but bad customer service is like being the most popular kid in school: You’re attractive and hip but you’re failing most of your classes.

Having great products and providing excellent customer service is what companies should be relying on to bring traffic to their site. There are no shortcuts to building your fan base. Simply put, if your customers aren’t having a good experience with you, it’s not going to matter one bit how high you rank on Google. You won't stay there for long.

Case in point, my husband and I (used to) frequent an Indian restaurant near our home. We loved the food and even went back with a few friends (i.e., new customers). Not only that, the food was reasonably priced. The restaurant was also located in an ideal spot near a commuter ferry on the waterfront. What more could you ask for? Great food. Decent prices. Ideal spot. Packed restaurant. Uh, scratch the last part. That’s right. The restaurant was empty. Always. Now, you would think this place would be popping with activity since Indian restaurants are pretty popular here in the Seattle area. But where we live, there aren’t a lot of good ones and this one was. 

The restaurant in question even managed to earn a top spot on Google - the #2 spot. Not bad for a new restaurant. But guess what? Right below the restaurant’s listing was also a very bad review on Yelp. Now, we all know that taste buds are not created equal, but a bad review is a bad review and it will scare some people away (the restaurant had a mix of good and bad reviews ranging from the quality of the food to the bored and unfriendly staff).

We advise our clients that having an integrated marketing strategy is the best way to build their business, not sophisticated, technical tricks. Focus on delivering excellent customer service first and the leads will come. Guaranteed.

And what about the Indian restaurant, you ask? Well, I visited their website recently and it is down. They are no longer in business.

As a small business owner, you’ve probably wrestled with this very important question: “How much do I spend on marketing for my business?”

What you will discover may surprise you and have a huge impact on how and where you decide to spend money. As a small business, be prepared to actually lose money on first-time orders.

“Wait,” you say. “If it’s costing me money to get customers, then how do I make money? I can’t afford to make a huge investment right now.”

The key is in the formula. Return on Investment (ROI) isn’t just what you make on the first sale. Even though a business may lose money initially, research has shown that most businesses make money over the average lifetime of a client. Yet, the formula we are talking about can be applied to any industry. Because if you don’t know how much your customer is worth, you won’t know how much to spend.

The formula for calculating how much a customer is worth is a great start to establishing a marketing budget. But creating a marketing budget shouldn’t be based on whether you have any extra money laying around. It’s about truly knowing your customer acquisition costs.

For example, let’s say your business made $50,000 last year. How much more do you want to make this year? This answer is crucial to deciding how much money to set aside for your marketing. Let’s say you want to make $25,000 more this year. And in this example, you have determined that an average customer is worth $500 a year in gross sales. In this case, this might mean $250 in net profit for your business. Divide the extra profit you want next year ($25,000) by the profit per customer ($250), and that gives you 100. That means you need 100 new customers to make $25,000 in extra profit.

CUSTOMER ACQUISITION COSTS

Now that you know how many new customers you need to make $25,000 in extra profit, let’s figure out how much it will cost to generate a new lead and what percentage of these new leads will turn out to be new customers.

Let’s say you invested $5,000 in a website, email marketing campaign, and social media. All of these efforts produced 25 new leads a month and you closed 50% of them.

25 x 12 =  300 new leads
300 x .50 = 150 new leads closed per year

So, take the $5,000 you invested in marketing and divide by the number of new customers (150) and you get $33.

$5,000 / 150 new leads = $33

This is your new customer acquisition cost. (The goal here is to not spend more on acquiring a customer than what a new customer is worth per year.) Essentially, you spent $33 to get $250. Not bad. What’s even better is that you made $37,500 more per year, a 30% increase from your original goal! (Note: Your new customer acquisition cost remains the same even if you decide to spend less for marketing. Spending less means you receive less in profits. See chart below)

Business Profit in Relation to New Customer Acquisition Costs

In our eBook, "What's a Customer Worth: Determining Your Marketing Budget in Challenging Economic Times", we outline several different industries and provide estimates on how much a customer is worth in gross sales.