Re: UKNM: Cost of bringing in visitors

[David Cabrera]

In online as well as direct marketing, customer acquisition and response /

visitor costs vary according to:


1.    the effectiveness of your media (targeting) strategy

2.    any incentives or special offers being used

3.    creative

4.    campaign timing


These aspects can be tested and measured to establish their impact on the

acquisition mix. However 4 further factors which are harder to quantify will

also have a significant bearing on visitor / acquisition costs


5.    how well known / regarded is your company or brand amongst your target

market

6.    the degree and type of competitive activity

7.    the basic demand for your product (e.g how many CD's and how many

holidays do you buy each year)

8.    the propensity of consumers to consider and then buy from a new

source.


For example in the online banking sector the average cost of acquiring a new

customer is reported to be �265 (FT late Nov / Dec 00). If you were to

assume a conversion rate of 1:20 then visitor costs are �13.25. Whilst these

figures would be unprofitable for many business models, it may be highly

profitable for others. Consider how much people pay each month in mortgage

interest payments, spend on credit cards (interest charges + banks take 2%

ish of total spend from the merchant) then add pension contributions, an

endowment policy, bank charges if you are overdrawn from time to time, etc

etc etc.


Therefore a financial services organisation with a good product mix that

offers competitive interest rates / investment returns, combined with a well

focused and targeted customer acquisition, cross selling and retention

programme will turn a �265 customer acquisition cost into a very profitable

investment.


The key starting point is to try and estimate the lifetime value of a

customer, the cost of customer service and then determine how much can be

invested in customer acquisition.


You will need a cost effective relational marketing database which amongst

other points (e.g. selling to existing customers is far more profitable than

generating new ones) will measure and quantify the effect of each and every

core variable in your marketing mix over the short and longer term. For

example visitors generated from one media source at an average cost of �x

could turn out to be significantly less profitable than customers generated

from a second source at �2x because a lower proportion make a first or

subsequent purchases and / or the average value of their spending is lower.


If you would like to know more mail me off line and we can discuss


Regards


David


----- Original Message -----

From: Bob S <

bbob909hotmail [dot] com

>

To: <

uk-netmarketingchinwag [dot] com

>

Sent: Tuesday, January 09, 2001 11:56 AM

Subject: UKNM: Cost of bringing in visitors



> Has anyone done, or seen, any research into the typical cost of getting a

> new visitor to a site (B2C), averaging out the various methods used e.g.

PR,

> advertising, viral marketing and so on. as I appreciate some methods are

> more cost effective per visitor but may not be able to pull in large

> volumes.

>

> I have a feeling it is about one pound per visitor, but I would really

> appreciate any info or links to info.

>

> Concrete examples would also be great, such as the cost Amazon spends

> getting each new visitor.

>

> Also, whilst I am asking, does anyone have figures or research on typical

> rates of conversion for B2C sites of visitors becoming paying customers?

> >From the bits I have found so far it seems that a lot of the figures are

> skewed due to some companies claiming a person who has simply registered

is

> a "customer" so they can ramp up their figures. Filtering these out seemed

> to indicate a rate of about 1 percent. Does this sound right?

>

> Regards



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