What’s the cost?

What’s the cost?

Open All HoursIt’s a question we all ask. It’s a question all our prospective customers ask. It’s asked for two reasons. Firstly, ignorance; secondly, importance.

Ignorance, because we usually don’t know what else we should be asking and neither do our prospective customers. It’s our job to answer the questions they should be asking. Be prepared and make a list of those questions – with the answers. Make sure everyone who answers the phone asks the right questions.  This will qualify the callers’ exact requirements.  It will also help to educate them as to what they’ll receive in exchange for their investment.  

Prospective Business Customers will Consider Alternatives

It’s likely that prospective customers will talk to our competitors so it’s helpful if we’ve armed them with the right questions to ask.  We don’t want them shopping on price given that we’re (hopefully) charging more for a better product and/or service. We all have to sell, but it’s helpful to think of ourselves not as sales people but as educators.

From the perspective of importance, cost matters to the customer, but there are more important considerations for them, such as “what is the benefit to me?” We, the seller, get some cash, but our customers should always get far more in value.

A better question for the customer to ask is how much value they get for the cash they’re spending. If we can translate that value into monetary terms, we can work out a return on their investment, which is always useful.

Coach your Business Customers to ask Better Questions

X costs £75 and Y costs £100.  Which do I choose?

X gives me £150, but Y gives me £300.  Which do I choose now?

A simple example we all know the answer too, but we often forget, or don’t make the effort, to quantify the outcome

Even if we can’t quantify the outcome, we will always attach a value to it, and it’s the buyers’ value that’s the critical value. I often see sellers attaching a value to what they’re selling on behalf of the buyer. Don’t! We can help our potential purchaser estimate and articulate the value of what they’re interested in, but we have no right to decide on what the value is to them.

Business Marketing

A classic example of this is when it comes to marketing. I regularly meet people who solely focus on the cost of different marketing activities with little regard for the outputs (leads and customers).

An exercise that we should all do periodically is to quantify how much a customer is worth to us. This helps to put any proposed marketing into context. This is relatively straightforward to do but does require us to collect a certain amount of information about our customers.  If the exercise seems daunting then you’re probably not sufficiently intimate with your numbers and you should definitely have this exercise on your “To Do” list!

The Life Time Value of a Business Customer

Calculating the Lifetime Value of a Customer (working with averages)

If the Average Purchase Value = £250

and Gross Margin = 50%

then Profit per Purchase = £125

If Purchases per Year = 6

then Gross Profit per Year:  6 x £125 = £750

If Years as a Customer = 3.5 years

then Life Time Profit Value:  3.5 x £750 = £2,625


…and getting a little more sophisticated:

If Lifetime Referrals from the same Customer = 4

and Conversion Rate of Referred Leads = 75% (should be far higher than normal leads)

then Additional New Customers = 3

and the Value of new customers over THEIR Lifetime (assuming the same spending pattern)

= 3 x £2,625 = £7,875!!


When it comes to marketing, it’s helpful to be creative and have a good imagination, but it’s more important to monitor, measure and do the numbers.

Brand Marketing for Small Businesses

PS When the owners of small businesses say, “it was really a brand-building exercise”, what they really mean is that their marketing activity didn’t work and they didn’t generate sufficient leads and customers.

Funding for Small Businesses

PPS Growth Voucher funding is still available for another eight months. If you employ less than 50 people and are ambitious to grow, check out the FAQ Growth Voucher website tab.

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Mark Dyble

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