The Only Two Numbers You Need




  • May 5, 2016

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    We live in a golden age of marketing transparency. The sheer number of ways to connect with people—including both current and potential customers—has exploded. With it, the amount of analytic data that’s available has grown exponentially. If you are looking for reports that show how your brand has grown on Facebook, for instance, or what kind of traffic you’re getting to your website, those numbers are readily available.


    And all of that’s great—but it can also be overwhelming, especially for entrepreneurs who are just starting out. What I’m going to suggest is that there are really only two numbers you truly need to worry about; that’s a little bit of a simplification, maybe, but not much of one—and besides, in this era of data-gone-wild, simple can be good!


    The two numbers every entrepreneur needs to know are these: The cost of customer acquisition, and the lifetime value of your customer. (For our purposes today, I’m rolling customer maintenance cost into that first category.)


    The first figure here exists almost purely under the marketing umbrella. There are plenty of ways to acquire customers through various social outreach and advertising methods—but how much do these methods cost? If you don’t know the answer to that, then you don’t know if they offer real value: After all, if your ad campaign ends up costing you $ 500 per customer that you bring in, and the lifetime value per customer is something closer to $ 300, then that’s hardly an effective strategy.


    For businesses that are well established, finding this information is a simple matter of analyzing old marketing reports—but what about entrepreneurs who are just starting out? My advice to them is to just try different things. Make educated bets, and learn along the way. Take stock of what works and what doesn’t; when you find something that does work, zero in on it with laser focus and precision.


    The same is true with lifetime customer value: If you’re just starting out, you may not have a lot of data to go on, but you can make some informed decisions based on average order size, re-order frequency, and the like.


    As an entrepreneur, you can fill your head with a lot of numbers—but I’ve found that these two figures can effectively function as a road map, helping me to focus my efforts on the things that are really going to help me grow my business over time.

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