I came across an article by Mark Chernoff recently which I found really interesting, in particular the following concept: ‘You have to be willing to fail forward’…
So, how many times have you failed in finding out business development strategies that actually work? I keep on failing in this area and you might think that I am crazy telling you this as I am supposed to be an authority in business development strategies. But the reality is that it’s a journey in which you both fail and succeed and that’s OK as long as you are going forward in the right direction.
In conversations with clients and colleagues about business development, people often ask me if they should pay to use a specific lead generation method such as advertising in a specific magazine, paying for SEO or indeed Google Ad Words. Generally my approach is that there is no ‘one size fits all’ answer and it very much depend on the following:
- Your target markets
- Your growth goals and strategy
- Your budget
- Your available resource
Now, I know that if you knew the answers to all of the above, you would probably be able to answer your own question but sometimes it is helpful to re-visit these questions in order to make a good decision. Another helpful method comes from Brad Sugar’s book Buying Customers which helps you consider marketing in a very down to earth approach. One of the key concepts in the book, is the difference between two types of acquisition costs:
- Allowable acquisition where the cost you pay per lead is lower or equal to the profit you make per customer, who buy from you as a result.
- Investment acquisition where you invest in a lead generation method knowing that the profit generated will not cover your cost. This is a longer term strategy made in the expectation that the return will be built on returning customers over time.
Brad says, and I agree of course, that for a small business to adopt the investment acquisition strategy, you need to have solid, long term cashflow that will support this. If you don’t, then stick to allowable acquisition methods.
So next time the local directory or glossy magazine knocks on your door to renew your advert, take the following steps:
- Consider your target markets: are they covered within the magazine readers or directory users?
- Consider your growth aspirations: are you actually trying to grow this sector at the moment?
- Do you have the budget/ cashflow available to cover the cost?
- Do you have the resources to follow up on enquiries and deal with the extra work?
If you answered ‘yes’ to most of the above, work out the acquisition cost:
Cost of the advert / number of customers you hope to generate = your acquisition cost.
If this works out less or the same as the profit you will make out of each sale then you have a good deal in your hands as long as you are expecting these customers to buy from you again.
I hope this is helpful. Do get in touch if you find this confusing, I will be happy to help you out.