It may seem like the purpose of every marketing campaign is to make a profit. However, many marketers and business owners actually lose money on acquiring new customers.
There are three basic scenarios when launching a marketing campaign. You need to determine which scenario fits your business best.
- Do you want to bring your customers in at break-even? This means for every dollar spent, you get that dollar back but no more. For example, if you spend $1,000 and you make $1,000 with your marketing efforts while acquiring new customers, you have done so at break-even.
- Are you willing to take a loss up front in order to obtain more customers that can make you more money on the back end? For example, if you spend $1,000 and you make $800 while acquiring new customers, you are taking an initial loss. But you can continue to sell more – and more expensive – products to those new customers, making additional money on the back end.
- Is your goal to make money on the initial sale? For example, if you spend $1,000 and you make $1,250 with your marketing efforts while acquiring new customers, you have done so at a profit.
The chart below is an example of a basic breakeven forecast:
Assumptions
This will be very important when determining your marketing channels (e.g., endorsed e-mail, banner ads, PPC ads, direct mail, etc.), as well as your media plan.
Remember – your goal does not have to be the same for each channel. You may strive to make money on many of your online channels, while you’re willing to take a loss on your direct-mail campaigns because of the associated lifetime value of the new customers you bring in.
[Ed. Note: The above article is an excerpt from Changing the Channel: 12 Easy Ways to Make Millions for Your Business, the best-selling book by MaryEllen Tribby and Michael Masterson. You don't have to be a CEO to put Changing the Channel's 12 Profit Accelerators into action. They can work whether you're a brand-new employee... or an entrepreneur... or the head honcho. If you don't have your copy of Changing the Channel yet, order it today.]
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Hi Michael,
doesn’t a micro startup business need to make money first? For me, I really have a hard time coming to grips with the idea of just breaking even or even losing money upfront – specially because I don’t yet have a backend. (An easy answer might be: “then get one”, but it seems to me like getting cashflow is more important at this point).
Joe Paz, the “Memory Improvement Man”