The whole point of successful marketing is to make your business money by attracting customers. The kicker? Successful marketing also costs money. So what's a good way to make sure the money you're spending on your marketing efforts is really paying off? One of the best options is measuring your cost per customer. If you divide your total marketing expenditures by the number of customers you attract, you can calculate your marketing cost per customer. Your marketing return on investment is largely determined by how well you control and minimize your cost per customer.
Some types of marketing simply cost more than others. You can lower your cost per customer by focusing your efforts on marketing activities that offer the best combination of effectiveness and affordability.
Below is a list of online marketing channels, ordered from what is typically least expensive to what is typically most expensive. You will generally want to focus on the cheaper marketing options first and optimize those endeavors before moving on to the higher-cost options.
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Customer referrals. Word of mouth is highly effective, and yet it is essentially free. However, it is also the channel that you have the least control over. You can at least encourage referrals, though, by making your content easy to share on social media.
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Search Engine Optimization. Organic search traffic is free, but you won't receive much of it unless you invest in SEO to improve your search rankings.
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Email marketing. Most email marketing is opt-in, meaning that people must either ask for or agree to receive your special offers or newsletters. These people are often existing customers, and they actually want to receive your emails, so the odds of them responding to your offers is relatively high. You can also buy email lists, which adds a layer of costs but also expands your reach.
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Search engine advertising. SEO is designed to get your name to the top of the list when people search for keywords relevant to your business. You can guarantee such placement, without any SEO efforts, by purchasing ads that will display whenever specific search terms are used. The ads are often priced on a per-click basis, so if you know the conversion rate, you can easily calculate what the cost per customer would be.
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Affiliate programs. The cost per customer of affiliate programs is often a percentage of the sale; if an affiliate partner directs a customer to your site, they get a commission based on the dollar amount purchased.
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Email newsletter sponsorship. One alternative to purchasing an email list is to buy advertising space on someone else's email newsletter. This is similar to the old media practice of featuring display ads in print publications such as newspapers.
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Banner advertising. Online banner ads can be priced on a per-click basis, a cost per thousand (CPM) impressions or a flat rate based on how long it appears on the site.
The effectiveness of each method can vary widely depending on the specifics of your industry and company. A more expensive option can end up being cheaper on a cost-per-customer basis if it produces a larger number of customers.Therefore, you may want to test different methods and track the results to determine which marketing efforts produce your lowest cost per customer.
