One of the most important numbers we need to always be mindful of is the “Cost of a New Customer” or “Cost of Customer Acquisition”.

Understanding Customer Acquisition Costs

If you are unfamiliar with this concept, let me give you a quick tutorial on this advertising metric.

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Suppose you run an advertisement in your local newspaper for your furniture store. Suppose for the sake of this example that you paid $1000 for your display ad in the newspaper.

Now, suppose your advertising brought 4 new customers into your store, who bought from you. Suppose also that the average spend for each customer was $1500.

With the example I am drawing, your $1000 display advertisement in the newspaper brought in 4 customers who spent a total of $6000 in your store.

I am going to keep this example simple, so that more people can keep up with the numbers.

On the basic premise of our example, you generated 4 customers after an outlay of $1000 in advertising. So your basic Cost Of Customer Acquisition was $250 per customer.

If your business received fewer customers, from your outlay of $1000 in advertising, then your Cost Of Customer Acquisition is more expensive.

But, if your business earned more customers who spent money, then your Cost Of Customer Acquisition would be much smaller.

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In its simplest form, the Cost Of Customer Acquisition is the money spent to get the customer to your store divided by the number of new customers acquired. We will look at this in more detail, later in this article.

The Best Way To Measure Sales And Marketing Performance

Entrepreneur Magazine in a 1999 article reflected on the Cost Of Customer Acquisition in the dot com world. The article suggested, “the cost of new customer acquisition is one of the best ways to measure sales and marketing performance.”

In 1999, the Cost Of Customer Acquisition for the following companies were:

On the surface, these numbers may seem small. But, Amazon’s Average Sale is in the $17-range! This makes the challenge that Amazon and other major retailers face fairly transparent. If these retailers could only count on one purchase from the newly acquired customer, then these businesses would be losing money by the truckload.

Fortunately, Amazon continues to perform well in Repeat Business from a single customer. The following calculations reflect additional numbers that we business people should also factor into our Cost Of Acquisition metrics.

The Real Value Of A Customer

Amazon’s first-sale may only be $17, but in 1999, Amazon’s Average Sales Per Customer was $116, up $10 from the previous year. Unfortunately, Amazon isn’t very forthcoming with these numbers, so after two hours research, I was unable to come up with more up-to-date numbers for you to consider.

The point of mentioning this is that it is important for business owners and managers to recognize that the Value Of A Customer is not how much sales revenue is derived from the initial purchase, but more importantly, from the Lifetime Value Of A Customer.

If we looked at Amazon’s Cost Of Customer Acquisition only in terms of that first sale, then they will be losing money hand-over-fist. With a Cost Of Acquisition of $27.60 and the first sale of $17, Amazon could not stay in business long if they were continuously producing numbers at that level. However, once you factor in the Lifetime Value Of A Customer, then Amazon is spending $27.60 to acquire a customer that is worth $116 in sales for them. Therefore, by measuring the Lifetime Value of a Customer, Amazon is spending only 24% of their revenue in order to acquire one customer.

Few businesses invest 24% of their revenue in advertising, but Amazon hopes that the Lifetime Value of a Customer will eventually exceed the $116 value, known to have existed in FY2000.

As the Lifetime Value of a Customer increases, the overall Cost of Customer Acquisition will fall, as an overall percentage value of Cost Of Acquisition divided by the Lifetime Value of the customer.

The Compounding Lifetime Value Of A Customer

If you have a hair-cutting salon and your advertising budget for one month is $1000, and you get 30 new customers through the door, who will spend an average of $20 for a hair cut, then your basic Cost of Customer Acquisition is roughly $33.34 to gain $20 in new sales.

But if only half of your 30 new customers become regular clients, then you can anticipate 15 of those customers coming to your hair salon at least once a month for the remainder of the year. Therefore, the first 15 customers will be worth $20 each, and the next 15 customers will be worth $240 each over the course of one year ($20 x 12 months). All told, your first 15 customers will put $300 in your cash register, and the next 15 customers will put another $3600 in your cash register.

Thus, in the hair salon example, your $1000 in advertising could generate new customers that will generate $3900 in new sales. Once you start to consider the Lifetime Value of a Customer, within the Cost of Customer Acquisition, then you will realize that the Cost of Customer Acquisition – although it might be higher than the initial sale – holds out the possibility and promise reducing itself as the Lifetime Value of a Customer increases over time.

As the end of the year winds down, you will be able to see that a $1000 expenditure was turned into $3900 in new revenue. In essence, for every dollar you spent on advertising that month, your return value was $3.90 over the course of one year.

In the second year, if only half of the original 15 regular customers or roughly 8 people stay with you for the full course of the second year, then the $1920 in revenue (8 people X $20 each X 12 months) you can expect from those customers could almost be considered free money. Of course, you will still have service fulfillment costs, but that second year will give you nearly $2000 in revenue that you will not have to chase.

Even if half of the customers drop off during the following calendar years, then a 50% customer attrition rate will allow you to have customers that could stay with you up to five years. Calculated against a 50% decrease in customers over each calendar year, your $1000 investment in advertising may translate into $7500 in revenues over five years ($3900 $1920 $960 $480 $240 = $7500), from the initial investment of $1000 in advertising.

The interesting thing about this scenario is that it is based on an advertising budget of $1000 ONE TIME. But, most businesses will continue the advertising process every month in every year. Therefore, the above example could compound month-after-month. Every month should bring the same or similar results to your business for the month and year.

Advertising Is A Process, Not An Event

Many small business owners have a dire misunderstanding of the nature of advertising and the value to be received from the advertising.

When business owners or managers fail to track and measure the new business generated from the advertising, then the business owners and managers will fail to see that advertising is an expense that can return huge dividends to the business.

When businesses fail to track and measure advertising successes, people tend to only see the money leaving the business without every seeing the reward coming back into the business. As a result, many business managers will employ advertising for a short time, then cancel the advertising, under the false belief that the advertising was not returning value to the business.

When businesses fail to understand the Lifetime Value Of A Customer, it is hard to appreciate any advertising method that fails to pay for itself in its first cycle. If Amazon was to only look at the initial sale generated by a new customer, they would quickly cancel all of their advertising efforts. Fortunately for Amazon, its management understands that the initial $17 sale is not the measure to use to determine the value of Amazon’s advertising efforts. Amazon’s management understands that the true Cost of Customer Acquisition should not be measured by the initial sale, but by the Lifetime Value of a Customer. In doing so, Amazon has ensured that it will continue to be one of the largest and most successful retail outlets on the planet.

When business managers fail to understand the Lifetime Value of a Customer, it is hard for them to appreciate and understand the compounding nature of the revenue stream for a business. It is hard for them to understand that money invested into advertising today, can deliver huge rewards over the next several years.

A Wake Up Call For Small Business Owners

According to Scott Shane, author of “Illusions of Entrepreneurship: The Costly Myths that Entrepreneurs, Investors, and Policy Makers Live By“, only 29-in-100 businesses will remain in business after ten years. That means that a full 71% of businesses started in any calendar year will be out of business in only ten years.

It is sad to say, but the reason most businesses fail is that business owners and managers fail to understand the nature of advertising, the importance of tracking and measuring advertising results, the Lifetime Value of a Customer, and the compounding nature of the revenue stream.

I don’t want to see your business on the trash heap of yesteryear. So, it is my hope that you will take this article as a wake-up call, as to the importance of advertising and its potential to lift your business into profits.

Editor’s Note: Article previously published here.

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Hunter Waterhouse has been helping business owners advertise their businesses online for nearly a decade. He is ready, willing, and able to put his experience to work for Main Street Businesses that seek to generate walk-in traffic to their stores, from the online exposure of their business. To learn more about how Hunter can help with your local business marketing, visit: onlinemarketinglocal.com/

Read more articles written by Hunter Waterhouse

The first tip that will help you to increase the readability of your articles is to write with the reader’s concerns in mind. If you are unsure of exactly how to do that, you may want to look into article ghostwriters who understand article marketing and who only focus on writing articles for Internet audiences. When you work with article ghostwriters, you can focus more on your business and know that someone else is working hard on your behalf to write articles that will be read.

Getting The Best Results From Your Article Marketing Campaigns

Still, if you want to keep article writing within your company, rather than outsourcing it, here are some tips for getting more out of your article marketing campaigns:

1. Hook your readers from the start. Article writing is a lot more effective for marketing your business when people will actually read the articles. The best thing that you can do is to catch their interest right away. Your article title will determine if people will open your article, and the first paragraph will ensure that people keep reading the article.

2. Avoid the temptation to overwhelm your readers with a lot of information. Article writing is not about telling the reader everything that there is to know; it’s about sticking with a central focus and giving your reader an introduction or overview of the information they want and need to solve their problems. In an article that probably won’t be much more than one thousand words, you will never be able to tell the reader everything they need to know to solve a problem, but you can help put your reader on solid footing for moving forward towards a workable solution.

3. Break up information into digestible chunks. Writing articles is about expressing some key points. When it comes to writing articles for the internet, what you are going to find is that many readers skim rather than read your articles. Using numbered lists (like this one) will help you to present your information clearly, and let readers find what they are looking for quickly. Similarly, if you use bullet lists or break up your text with subheadings that are in a larger font and bolded, you can be sure that after reading your article, the article’s key points will be easily recalled.

4. When it comes to article writing, particularly when you are working to establish yourself as an expert, it’s important to show that you know what you’re talking about. A great way of doing that – and to break up the text of your article – is to include quotes from more established experts. If you are writing articles and are more established, you too should quote other sources, possible letting the readers know why you disagree with another writer.

5. Focus on spelling and grammar. Just as someone who is hiring article ghostwriters should take the time to find ghost writing services that are well versed in your point of view, it’s also important to be sure that you’re writing in the native language of your target audience. American English is different from that spoken and written in England and India. Paying attention to your spelling and grammar shows that you care about what you are saying and that you are a professional.

A good example of the difference between the usage rules in British English and American English is the story of Paul Marshall from Dallas, Texas. When Paul was running his mortgage business, he had hired some Indian writers to develop content for his website. When he received the copy from his ghostwriters, the copy used the word “mortgage scheme” in the text eleven times. Paul was pissed, as you might well imagine. In British English, “scheme” does not carry any negative connotation. Yet, as you may well realize, “scheme” in American English is one of the most negative words that can be applied to any business model. It denotes “dishonesty” and “fraud” in American English. His Indian writers could not understand his anger with their choice of words, but you can understand his anger.

Professionalism In The Article Writing Process

Professionalism, unfortunately, is frequently overlooked when it comes to article writing. Great writing flows, not just for the writer whose aim is to get the words and message out, but also for the readers who are consuming the information.

Because of this, one key element of an effective article is not the writing itself: it is the readability of that article. Take the time to look at the articles that grab your attention and jot a few notes about each of them. Specifically, focus on the following:

Article marketing when used well can help a company establish itself as an expert in the field, and it can help show a reader why hiring the author’s service might be better than a do-it-yourself project. As an example, with the resume advice article, once the reader sees how comprehensive your knowledge is and how detailed a resume should be, the reader may just decide that using your resume writing service will be much more productive than the do-it-yourself resume.

Just Like Lawyers, Writers Specialize Too

Beyond the cost of labor, content development is usually the second most expensive expenditure made by the online vendor. It is important to note that just as there are lawyers who specialize in one area of law, there are also ghostwriters who specialize in certain types of content creation.

People who write sales copy are referred to as “copywriters.” Copywriters are people who understand the nuances of how to make people buy what you are selling.

They understand that replacing a single word in the sales copy could mean the difference between lukewarm sales numbers and red-hot sales numbers, and they know which words to change.

Some professional copywriters have a proven track record of writing sales copy that has generated millions of dollars in sales – people such as Frank Kern, Dan Lok, and Joe Vitale. These guys know the value of their copywriting skills, and they charge accordingly. If you ask them to write sales copy for you, don’t be surprised when they quote you a price in the range of $5-20 per written word.

Other writers might specialize in writing books, brochures, and articles. Some writers specialize in the smaller word counts, like the folks who write greeting cards and book jackets.

Finding The Best Writer For Your Needs

The kid down the street who writes part-time for the newspaper may or may not be the best person to write your online articles for you. One reason is that people who write for offline publications seldom appreciate the importance of keywords in an article for search engine marketing purposes.

Note this article for example. Our purpose is to show you how you can use article marketing as a successful marketing tool for your business. We also want to show how the articles should appeal both to the reader and the search engine algorithms.

With these thoughts in mind, when you are finished reading this article, read it a second time to see how many variations on the following SEO keyword phrases can be found in this article: article marketing, search engine marketing, keywords, advertising, content creation, writers and copywriting. Of course, copywriting is not the kind of writing we do, but people who do not understand the specialization of writing skills might type “copywriting” or “copywriters” into their favorite search engine to find someone who writes informational articles.

One never knows precisely what the public will use as their search keywords when they go to the search engine to find information. That is the very reason why a good online article writer must strive to showcase a range of similar keywords within the context of an article.

Your Article Marketing Strategies Influence Your Overall Success

We know that some people tell you that the only reason to write an article is to get a link back to your website. What most of these people don’t tell you is that most websites that accept reprint articles do so, only after a human has reviewed or at least scanned the article.

An article that does not read well will never be published on a top-tier website. Yes, some websites may accept a poorly written article, but more sites will only accept well-written articles.

A reader who is not impressed with your article will seldom reach your resource box, so the link back in the resource box can only give value to your website from the search engines – maybe. The search engines generally only give value to articles on good websites or those placements that have lots of links pointing to the article within the website. Bad articles don’t get published on good websites, and they do not attract links.

As the Marketing Rule Of Seven should indicate, multiple articles generate a long-term wave of new links and potential visitors to your website.

Consistency is also important to a successful article marketing campaign, in that releasing weekly articles will enable your readers to see your marketing message regularly.

Finally, the smart use of a variety of related keyword phrases will strengthen the ability of your article to appeal to the search engines and the people who use them.

If you can balance the needs of your article’s audience against your need for search optimized content, then you can benefit handsomely from your article marketing campaigns.

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Hunter Waterhouse has been ghostwriting and building websites
since 1999. He is ready, willing, and able to put his experience to work for Main Street Businesses that seek to generate walk-in traffic to their stores, from the online exposure of their business. To learn more about how Hunter can help your offline business, visit Online Marketing Local at onlinemarketinglocal.com/local-services/

Read more articles written by Hunter Waterhouse

Before the emergence of computer programs that could ‘create’ articles and pieces of web content, human writers were responsible for developing all the original content for websites. However, with the rise of blogs and websites for independent publishers, several applications are now available that simply churn out content made from a computer program. While these have the potential to create several articles on a given topic, they do have limitations. Semantics, sentence structure, meaning, and even punctuation are often overlooked with these content spinners and programs, and if they are caught by a search engine, the risk of website blacklisting runs high.

Human writers provide reliable, authentic, and original content on a regular basis. By making use of natural creative processes to develop and present an idea, they can develop a series of original articles for any website or company.

The Value of Authentic Content and Original Articles

All website and business owners know how valuable original content is for search engine placement, website validity, and credibility in their industry. Without a steady supply of original articles, it is difficult to keep visitors returning to the site and maintaining interest in the company. The increasing popularity of blogs is just one example of why ‘content is king’ still rings true on the web today. Human writers can develop articles and unique ideas far better than any computer software and application. Unfortunately, many companies choose applications that lead to poor quality content and a decrease in their credibility.

What Content Creating Software Does

Content creation software is designed to string words and sentences based on a topic and basic article. These programs run several variations of an article by substituting synonyms and words throughout the page, and reconstructing sentences to generate a ‘new’ or original article. Today’s leading content duplication and content creation software programs include: Article Content Spinner, Jetspinner, SiteEqualizer, ArticlePro, and Article Output.

While these article and content spinner programs offer many promises of ‘well-written’ article and original content, they are not always accurate enough to catch duplicate sentences, and they often have trouble even putting together sentences that make sense. In many cases, their processes are considered to be forms of copyright theft, especially if the original article used as the input was not generated by the owner. Search engines that can find even one sentence duplicated from an article can bar the website from being listed on the rankings, and a single sentence ‘stolen’ in this way is at risk for copyright infringement.

Why Companies Need to Pursue Quality Human Writers

Google is the leading search engine on the internet, and specifically outlines its duplicate content policy in the user terms. Article spinners that help generate ‘original articles’ can create significant damage to a company’s page ranking and credibility online, putting them at risk for copyright infringement and other penalties. Submitting just a single article to an article directory can be shared across multiple web pages and websites, but using a content spinner to create ‘fresh’ content from this very same article puts all of the content at risk.

Article marketing has become an industry in itself, but finding high quality human writers is the most efficient, and safe, method of generating valid clicks and increasing visitors to the site. Human writers can provide benefits beyond the limitations of article content creation services. These include completely original article batches, clear and consistent messages, an author’s voice, powerful words and phrases that are easy to read by all visitors, and simply and efficiently provide unique and creative ideas in an original format. Human writers can often provide a fresh perspective on a topic or idea, something that cannot be achieved with automated article writing software packages.

This article previously published here.

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Hunter Waterhouse has been ghostwriting and building websites
since 1999. He is ready, willing, and able to put his experience to work for Main Street Businesses that seek to generate walk-in traffic to their stores, from the online exposure of their business. To learn more about how Hunter can help your offline business, visit Online Marketing Local at onlinemarketinglocal.com/local-services/

Read more articles written by Hunter Waterhouse