How Much Does a New Customer Cost?

When concocting a small business marketing strategy, eventually you have to settle on an important number, how much does a new customer cost? Before you can answer that, you need to figure out the operational definition of “new.” Does a customer who’s purchased from your brick-and-mortar outlet but never from your web site constitute a “new” client? What about buyers who’ve made contact with your brand in other contexts but never bought directly from you? The reason it’s important to create a straight definition is that your response will play into your cost calculus.

For instance, it generally takes fewer ad dollars to create a repeat customer than it does to “mine” a new customer from the ether of the Internet. Understand the gradations of newness, and work with a budget advisor and an ROI calculator to ensure that your small business marketing strategy addresses the concerns of each of these niche groups.

How do you factor out this cost? Let’s say that you are starting from scratch. To make a potential customer into an actual one, you first must introduce her to your brand. You can do this by means of referral (word of mouth) or more indirect advertising. The farther removed your theoretical customer is from your referral chain, the more you’ll generally have to pay for her business.

You also have to calculate web site fees, shipping and handling costs, taxes, infrastructure costs, and any fees or costs associated with hiring a consultancy. Moreover, you have to look at customer buying patterns. How much revenue does each new purchase bring in? Do new customers tend to return? If so, you may be able to make up extra profit per customer over the long term. Put these “return customer calculations” into the mix as well.

If you utilize a Pay For Calls or Pay Per Click system, you may have to pay a premium for new leads. If you use organic search engine optimization, you ultimately have to subtract the costs of optimizing your web site from your net profits.

Use a thorough ROI calculator -- like the one available here at Superpages, to do the numbers, but remember that there are intangible benefits to gaining new customers that may not show up on your ledger. Word of mouth referrals can ultimately subdue your ad costs and improve your brand image, for instance.

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