The Cost of Bringing in Customers

If you do little advertising, this column will mean nothing to you. If you do a lot, here's a little exercise to see how much those prospects and customers cost you.

Start here: How much did you spend last month for advertising that includes newspaper display, media advertising, direct mail and local ads? Now, divide that by the number of people who came into your showroom as a result not buyers, just walk-ins.

To do this correctly, you'll have to ask every person who walks into your showroom how they heard about you. You'll also have to track whether or not each prospect buys. It's not hard. When someone comes in, just say, "How did you happen to hear about us?"

For example, let's say you spent $3,000 on display ads, $700 on radio, $900 mailing postcards or flyers, and $500 on peripheral buys. That's a total of $5,100 for the month. As a result you had 30 walk-ins and sold six of the customers a new kitchen or bath. By doing the math, you'll find that from the $5,100 you spent on total advertising, you were able to generate 30 new walk-ins or leads by spending about $170 per prospect.

Could you spend that money more effectively? Could you get better results and not spend as much? What if you went door-to-door and asked people if they might be interested in a new kitchen or bath? If they were, what if you said you would pay them $170 to come into your showroom to see what you have? How many people would come down? I bet they would follow you back to your showroom. Of course this idea is far-fetched, but the point here is that we need to find the right people, develop some interest and excite them enough to sell them a kitchen or bath that will enhance their lifestyle.

Luring Customers
Car dealers are notorious for luring people into their dealerships with direct-mail pieces offering free cameras, watches, diamond pendants and things of perceived value. These dealers know that once they get prospects through the door, they will have a better chance of selling them a car.

A little-known fact in the car business is that, many times, the sales manager will get salespeople together at the end of the month and offer them $100 to get a previous prospect back in one more time for a test drive. It doesn't matter if the customer buys or not; the salesperson gets the money. They know that getting them in one more time face-to-face has a high closing ratio.

It makes sense you're putting someone who is interested in buying together with a salesperson who is motivated to sell. Believe it or not, more than 60 percent of the people buy once they drive the car a second time.

So, think about this for your business. What could you offer prospects who didn't buy, or new potential prospects who are teetering on the edge, that would entice them to come and look at a new kitchen or bath? You're not going to want to do this with a display ad. The prospects have to be more qualified.

Direct Mail Route
You might want to consider a carefully selected mailing list targeted to the right type of people. As every area is different, this is something you will have to check out for yourself.
If you've determined $170 is your cost to find a new prospect, you could always offer TVs, DVD players, stereos, digital cameras and any number of the latest technological gizmos. But don't do it. You'll get a lot of people, but most will just be freeloaders and freebie-seekers. Go with something for a lot less money, but something that also will attract people with some interest. For example, offer glass crystal-like pitchers and glasses, plates and glass sets for the patio, a unique showerhead, framed pictures for a den area, a book on decorating and other sorts of gifts that are meant to beautify a home. These are targeted toward the type of people who are coming into your showroom in search of a new kitchen or bath.

Tie this promotion in with a direct mail piece that offers the item that has the right image for your business. Let prospects know, in the mail piece, that the item is your free gift to them just for stopping in to see and get an estimate on a new kitchen or bath. Make it clear, however, that without an estimate, they will not receive a gift. This way you get all the information you need to follow up the lead in case they are reluctant to make a commitment on the spot.

Don't discount the value of a good direct mail piece offering something of perceived value to prospects for free. Furniture stores do it. Car dealers do it. If it works for them, it could work for you.

However, don't run a promotion of this type in a display ad in the paper. You'll spend too much money and get minimal results because you can't pinpoint your target audience.
Direct mail is more like underground advertising. You can do it over and over again with different mailing lists. You can do it with just a few people at a time, or hundreds or thousands while selecting the demographics of people you want it to go to.

The other perk pertaining to direct mail of this type is that you can keep testing and re-testing your prospects to find out which gift works the best for your market, and you don't have to spend a lot of money each time. When you find a give-away item that attracts the most people, stick with it. Other people won't know about it until they get the mailer or their friends tell them about it.

So, figure out how much each customer is really costing you with the current advertising you're doing. Then, see how much less you will have to pay by sharing a little bit of that cost with the customer. You might be surprised.