Posted by: Michael Masterson
November 25, 2008
Issue #553

The Optimum Strategy
for Acquiring New Customers:
How to Discover and Implement It

"This may seem simple, but you need to give customers what they want, not what you think they want. And, if you do this, people will keep coming back."

John Ilhan

I believe that for every business, at any given time, there is an optimum strategy for acquiring new customers - and that the primary marketing obligation of the company’s CEO is to make sure that strategy is discovered and implemented.

What do I mean by an optimum strategy for acquiring new customers?

I mean a marketing and sales strategy that will produce the greatest long-term benefit to the company. Usually, that means finding and converting the greatest number of high-lifetime-value customers, i.e., customers who will continue to buy products from the company for years into the future.

Here’s an example …

Since its inception, EarlytoRise.com has recruited almost all its customers through Internet advertising. Of the many conversion strategies we have tested, two have so far proven effective:

1. Selling informational reports on other websites and then giving buyers a free subscription to our daily e-zine, which then sells them all sorts of "back-end" products.
2. Targeting search engine users on a pay-per-click basis with a free special report, and then giving them a free subscription to the e-zine with its back-end selling.

What we found - over and over again - is that those who had purchased our informational reports were worth considerably more over the long-term than those who had responded to our free report offers.

We tested three levels of pricing for the informational reports: $20, $50, and $100. By tracking the spending habits of each group, we found that the $20 spenders were each worth about $6 extra per year, while those who spent $50 were worth about $50 extra per year. Interestingly, those who spent $100 were no more valuable, in terms of back-end buying, then those who spent $50.

Based on those findings, we concluded that our best strategy was to sell as many $50 reports as possible.

I should mention that the strategy of converting pay-per-click responses brought in (and still brings in) many more names. But when we add up the net dollars we make through pay-per-click versus product buying, there is no contest. The product buyers contribute much more to our bottom line. That’s why we consider the first method, selling informational reports, to be our primary customer-acquisition strategy - and that’s why we devote more resources (time, intellect, and money) to it.

Because this is our primary strategy for attracting the kind of customers we are looking for, ETR’s marketing and editorial teams spend a good deal of time developing new information products to sell on the Internet. Most of their ideas come from the content of our daily e-zine - by carefully reading it and asking themselves, "Can any of these ideas be converted into exciting new information products?"

Coming up with new products to sell is critical, but it’s also important to figure out how we want to "offer" them to the marketplace. In traditional direct-marketing parlance, an offer consists of five things:

• The product you are selling
• The premiums that come with it
• The price you are charging for it
• The payment terms
• A guarantee

We have learned from experience that the high-lifetime-value customers who come from ETR’s readership have typically responded to an offer for a product that will make them wealthier, healthier, or happier … so long as that product doesn’t cost more than $50 and comes with a strong, no-questions-asked, money-back guarantee. So that’s the kind of offer we construct when we test a new product in the marketplace.

But just because this kind of offer has worked in the past doesn’t mean it will always be the best offer. So we test different price points, payment terms, and guarantees on a regular basis.

We also test our marketing copy. We test headlines. We test leads. We test hard approaches against soft approaches, benefit-oriented pitches against idea-oriented ones. We test just about anything, so long as we think the element we are testing has a reasonable chance of increasing the response rate by a substantial margin.

Right now, in this market, ETR’s optimum customer-acquisition strategy is to create and market as many $50 information reports (with strong promises, guarantees, etc.) as we can on the Internet. But this may change. We might, for example, discover that we can bring in more names by taking the same lead-conversion strategy and testing it in the mail.

It would be foolish for us to believe that the customer-acquisition strategy that is working optimally now will always be the best one for us. Markets change because the culture does. Some of the fundamental psychological principles will remain the same, but the individual elements of any marketing campaign will change over time.

Good marketers understand this. And that’s why they are always testing. The first thing you should do after you have discovered a great way to sell your product is to start working on another way that will one day beat it.

Take a moment, right now, to identify your company’s optimum customer-acquisition strategy:

What’s Your Primary Advertising Medium?

• direct mail
• direct e-mail
• direct space (magazines & newspapers)
• direct e-space (websites and e-zines)
• telephone
• radio
• television

What’s Your Primary Lead-Conversion Strategy?

• direct space to direct mail
• direct e-space to direct e-mail
• direct mail to direct mail
• telephone to telephone
• telephone to direct mail
• radio to telephone
• radio to direct mail
• television to telephone
• television to direct mail

Describe Your Offer

• the price
• the product
• the guarantee

Describe Your Sales Copy

• the big or overarching idea
• the promise of benefit
• the specific claims
• proof of those claims

Once you have identified exactly what you are doing, you can start to think about how you can "test away from it." Spend some time brainstorming with your best people. Ask key questions, like:

• What other products can we sell?
• How can we make the offer more enticing?
• How can we make the copy more compelling?
• What other media should we test?

There are hundreds of ways a business can go bad, but only one sure way to make it better: Increase the number of good and profitable customers.

New customers bring new cash, and that cash that can be spent on anything your business needs, including better products, customer service, fulfillment, etc. You name it, cash and a little time will make it happen.

That’s why, at the beginning of this article, I said that discovering and implementing the company’s optimum customer-acquisition strategy should be the CEO’s top marketing responsibility. It’s that important.

Contributed by Michael Masterson
Guest Contributor
THE TOTAL PACKAGE™

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7 Comments »

1. Comment by Jeremy Reeves — November 25, 2008 @ 1:07 pm

   Great article Michael,

   I think the most important point you made is that it’s important to find out exactly where your most profitable customers are coming from (in you case, the $50 customers).

   That would help people stop producing items that don’t have a good chance of making them money and get them focused on making products that WILL make them money.

   Jeremy Reeves
   http://www.controlbeatingcopy.com

2. Comment by JT — November 25, 2008 @ 1:35 pm

   Someone please clarify. I don’t get it when Michael mentioned…
   Selling informational reports on other websites and then giving buyers a free subscription to our daily e-zine, which then sells them all sorts of "back-end" products.

   My question is where does he get his traffic?

3. Comment by Chuck D. — November 25, 2008 @ 7:59 pm

   Selling on other sites is typically a joint venture proposition.  I cut a deal for you to plug my info product for a share of the profit.  50% is typical although depending on the return you expect (which every good marketer should know) you can pay out 100%. 

   Fulfillment will take the customer to my site where they’ll pay me, give me their email info and and then I throw in the free subscription (the sale is tagged with a code from your site so I know who to pay.)  My free e-zine gives the sub even more value and allows me to pitch back-end products to him which is my real bread and butter.  It’s a great way to build a profitable list because the prospect should be pre-qualified coming from the JV site.

   Hope that helps…
   Chuck

4. Comment by Dean Dhuli — November 26, 2008 @ 7:57 am

   Good article.

   It once again illustrates the importance of testing which most people tend to overlook.

   Thanks,
   Dean Dhuli.
   http://HighPowerCopy.com/

5. Comment by Ian Brodie — November 26, 2008 @ 11:45 am

   This is an excellent article - and really highlights the importance of both testing - and of deriving insights that are unique to you and your business.

   The received wisdom is that you should do free reports which then drive traffic and sign-ups - which downstream turn in to revenue. This analysis shows that in terms of lifetime value - for this specific business - it’s better to have lower but "more likely to buy" traffic from the $50 reports.

   Of course, it will be different for different businesses - but it really shows that you have to do the analysis for your own specific business rather than relying on what everyone else says works for them.

   Ian

6. Comment by Marcelino Latorre — November 26, 2008 @ 2:26 pm

   Here I am waiting for YOU to slam the shit out of this and you pop off with this short post? You you.. 

7. Comment by bob — November 30, 2008 @ 10:18 pm

   its all about the dollar!