When I started working with one of my private clients, they were selling a product online for just $27. That was their average customer value, $27.00. As you can imagine, it was extremely difficult, and turned out to be impossible, to profitably market this product online. We tried every possible traffic source and every trick to increase sales conversion rates. Nothing worked.
Until we shifted our focus to the real problem, which was the low customer value. Once we increased the average customer value to $50, and then to $70, and then to over $100, and eventually to over $150, we could easily find profitably traffic sources! That was the secret to growing their business unit from $0 to $4 million over four years.
Watch the video below to learn if customer value may be your biggest opportunity like it was for my client four years ago.
If you liked this video and you want to learn more about how I can personally help you improve your marketing results, then email email@example.com. You’ll receive an email with details about our Marketing Breakthrough program so you can see if it’s a good fit for you.
Hey. This is Phil Frost, from Main Street ROI. Today, I want to focus on an area of your online marketing that a lot of businesses overlook, and that’s your customer value. Your customer value is how much money you make per customer on average. That ultimately determines how much you can afford to invest to drive traffic to your website. If you have a high customer value, you can afford to pay more to drive traffic to your website. If customer value is low, then that will limit how much money you can invest to drive traffic, and you won’t be able to afford to pay to drive a lot of traffic to your website. Today, I want to talk about when it’s appropriate to focus on your customer value versus all the other options, like focusing on new traffic or focusing on new website conversion rates. I’m going to walk through a process that I use with my private clients, and it’s based on the 4 pillars of online marketing success.
If you have seen any of my other videos, this is going to look very familiar. The first pillar is traffic. Traffic is simply how many visitors you’re getting to your website on a monthly basis. The second pillar is your conversion rate. How many of those visitors are you converting to customers? Let’s say you have 100 visitors to your website, and on average, you can convert 1 of those visitors into a customer; your conversion rate is 1%.
The next pillar here is what we’re talking about today, and that is your customer value. On average, how much money to generate per new customer? Is it a $100 or $500? Whatever that number is, that’s your average customer value. Those 3 pillars right there determine how much money you make from your online marketing on monthly basis. You can calculate that very simply by just multiplying all 3 of these numbers, and that gives you your revenue. You multiply How Much Traffic You Generate to Your Website x Conversion Rate x Average Customer Value = Total Revenue from your online marketing campaigns. The goal here is to increase that revenue so you can increase either one of these or all 3; increase your traffic, improve your conversion rates, or you can increase your customer value. Those are really the only 3 areas to improve your revenue.
There is a fourth pillar to online marketing success. I’ll put that over here, and that is tracking. None of this is possible; you can’t calculate traffic, conversion rate, or value without proper tracking in place, and that is absolutely critical to online marketing success. While these determine your revenue, you can’t optimize any of them unless you have tracking in place.
Today again, we’re going to talk about when to focus on improving or increasing your customer value. There is 3 criteria that you want to look at. This may look familiar. This first one here, if you’ve see my previous videos, you first want to look whether or not you’re driving traffic to your website. If you’re not driving any traffic, traffic’s you’re Number 1 priority. You also want a diverse source of traffic. If you only get traffic from SEO or you only get traffic from Google AdWords advertising, then you got all your eggs in one basket. You really should diversify and focus on getting more sources of traffic. If you do have traffic at your website and it’s coming from a diverse source, then you may want to focus on your customer value.
Let’s look at the second criteria here. The next thing you want to look at is what’s called your EPC, or earnings-per-click, which is just how much money you make for each click to your website, or each visitor to your website. It’s very easy to calculate this, assuming you have proper tracking in place. You’ll just multiply Conversion Rate x Average Value; that’s your EPC. I’ll give you a very simple example here. Let’s say your conversion rate is 1% on average. If you get 100 visitors to your website, you’ll convert one of those to a customer, then your conversion rate is 1%. Let’s just multiply that by a customer value of $500. In this example, your EPC would then be $5.
That means you can afford to take up to $5 to drive someone to your website. As you can see that limits what you can afford to pay to drive traffic to your website. If you can increase that number to $6 or $7, now you can open the door to more advertising opportunities. If you’re looking at Google AdWords and the cost-per-click on a keyword is $6, you know you won’t be profitably paying $6 because you only make $5 per click. If you can increase that to $7, now you can afford to go after that keyword and drive even more leads in your system and more sales; increase your revenue. That number right there, your EPC, limits how many opportunities you have to drive traffic to your website.
The criteria here, if this number is limiting how much traffic you can get, then you may want to focus on increasing your customer value, If it’s not, if you go look up . . . I’ll just use Google AdWords as example, or a partner offers to send you traffic and they want $3 per visitor, you can afford to pay that. Don’t focus on your customer value right now, it’s a no-brainer, go focus on traffic. If you can afford it, focus on traffic. If you can afford it, it’s possible that customer value is your bigger opportunity.
The third criteria here, is that you have opportunities to increase value. If you have opportunities, for example, you can increase the prices of your product or service, that would increase the value that you generate per customer, obviously; if you can add up-sales. If right after someone makes a purchase, you can offer them something else of value, maybe you can offer them to automate the process for them, speed up the process for them, offer some insurance or maintenance-type deal on a monthly basis, continue to improve whatever it is you’re offering. Whatever you could offer there as an up-sell on a backend, that will increase your customer value. Another area is referrals.
If right now you don’t have a customer referral system, then you have an opportunity to increase your value by introducing a customer referral program. If every new customer that comes in your system then refers another customer, one customer is really worth 2 customers, so you’ve instantly doubled the value. You’ve gone from $5 to $10 EPC. Now you open the doors, you really have a lot more options to advertise, drive even more traffic, more revenue, more profits.
Again, if you have multiple sources of traffic, you’re getting traffic from multiple sources, and your EPC is limiting you right now; you can’t afford more traffic and you have opportunities to increase the value, either by increasing your prices, by introducing up-sells, or introducing a referral program, then you really should focus on increasing your customer value with these 3 areas here.
I hope you got a lot of value out of this exercise. Again, this is the same process that I use with my private clients. We go through this on a monthly basis to determine, right now, what is your biggest opportunity in your business to increase sales from online marketing? If you got value out of this and you want to learn more about a new program that put together, then email firstname.lastname@example.org. This new program is called Marketing Breakthrough. I’ll work with you personally to go through this process on a monthly basis and identify your best opportunities. Not only that, I’ll help you execute that.
If we go through this and we determine customer value is your biggest opportunity, then I’m going to show you exactly how to test different price points, how to split test, how to introduce up-sells into your system, when to introduce those up-sells, how to create a customer referral program, and what’s most appropriate for your type of business. Again, if that sounds like something you’re interested in and you want to work with me personally on a monthly basis, then email email@example.com. We will reply with all the details. We’ll reply with an email listing out all the details of this program, and then the next step would be to schedule a 30-minute, 1-on-1 consultation with me. I will go through this process on the phone with you, specifically focused in on your business, focusing on what are your best opportunities. Ultimately at the end of that call, my goal is to have a marketing plan for you so that you know one of your biggest opportunities. Then if you want to move forward with the program, the next steps would be to actually execute on that marketing plan and on the tactics that I go through on that call.
. If it’s a good fit, I look forward to speaking with you soon. Take care.
Main Street ROI is a digital marketing agency based in New York City.
Our mission is to help small businesses thrive. With our services and training, we help small businesses succeed with marketing regardless of their budgets.
Since 2010, we’ve helped thousands of small businesses create profitable digital marketing campaigns.
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