Franchise Articles

Posted on Jun 12, 2011

Build Profits Through Buying Customers

Money Bag - Franchise HelpIf you bought a stock or invested in one of the many franchise opportunities or business opportunities out there today, you would expect to see a return on your investment, wouldn't you?

Of course you would.

How long would you continue to “throw money” at an asset that didn’t give you a return?

Not very long.

But business owners do this every day when it comes to growing their companies. They spend money and resources on marketing and advertising, but they are unsure of their return, or worse, know that they are losing money but keep doing the same thing over and over again anyway.

Does that make any sense?

There is a new and better way of looking at your business And that is to view it as a profit-making machine that buys customers who will spend more than the price they were purchased by you for.

What if you could start investing dollars that would bring new customers to you at a guaranteed profit? What if you started looking at each customer as a true asset and real investment? If you began viewing your business this way, do you think it could make a big difference to your bottom line? Unfortunately, most business owners do not see their marketing in this way.

Instead they look at marketing as an expense that is necessary, but at times difficult to justify due to the expense. When you view marketing as an expense rather than an investment, it’s easy to lose perspective on what’s important and why you market your business in the first place.

You market your business to build your company’s profitability through communication and education. You need to get your message to your target market and educate them about how you can fill their needs. But you do not have to do it in a way that costs you valuable resources and puts you in a bad position over the long run.

Buying customers or spending an amount that is less than their lifetime value to your business, is a lot like “value” investing.

The goal is to get the best customers possible at the lowest possible price, while expecting that those customers will spend repeatedly with you over the course of several years, or their “lifetime” as your customers. In fact, a new customer’s “lifetime” value is the key in determining exactly how much you want to pay to buy that customer. Quite simply, the longer they stay with you, and the more they buy from you, the better the return you get from your original purchase.

Just think of buying customers this way: If you spent $1000 on an advertisement and got 10 new customers, you just paid $100 to buy a customer. If they spend more than that $100 with you, you’ve bought them at a profit. If they spend less you bought them at a loss.

Imagine you could buy a customer for $10 and they immediately spent enough to give you $20 profit. That’s right $10 went out and $20 back came back in.

At this rate, how many times would you invest that $10?

When you start thinking in terms of buying your customers instead of running an ad campaign to get new customers, you open up new possibilities regarding maximizing your advertising efficiency. You no longer think in terms of profiting on a unit of stock or some service you provide. You start to think in terms of the profit you make on each customer.

If you buy them at the right price, you will always make a profit.

Buy enough of them and you will always have a thriving, growing business.

Brad Sugars is the Founder, Chairman and President of ActionCOACH, the world’s number one business coaching and executive coaching firm, with more than 1,000 offices in 32 countries. ActionCOACH specializes in coaching small to medium size business as well as executive teams and group coaching. You can follow Brad on Facebook and Twitter.

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