RM3000 for 300 customers

Do you know how many business owners still operate by gut feeling? 

Answer: A lot. 

I once consulted an owner of a tuition centre. When I asked about her goal, she said 300 students per month. Then she said she wants to spend RM3,000 a month to get there. (See my reply below)

Ohhkay, so you want 300 students. You’ve got a RM3,000 ad budget. 

That means you’re looking to acquire a student at RM10 each. 

I told her that while it’s not impossible, it will probably be tough. Then, to adjust her expectations, I advised planning an acquisition cost of RM50 per student. 

“But we only charge a student RM250 a month,”  she said. 

“You’re not willing to spend RM50 to acquire a student?” 

“Umm.. no”

“Ahh, I see the problem.”

I had a business owner who wasn’t willing to spend more than RM10 to acquire a customer. Why? Because she only profits RM100 from the RM250 a student pays, and acquiring a student at RM50 per pop “feels” expensive. 

“Well, ok… how much does your typical student pay over a year?”

“12 months.. So that’s RM3,000 average. Out of which, RM1200 (40%) is profit.” 

“Would you trade RM50 to get RM1200 in profit?” 

“Yes!”

The answer is in plain sight. 

In the era of instant gratification, the lack of long-term thinking is what usually kills good marketing plans. 

Today, measure your CAC and CLTV:

• Customer Acquisition Cost (CAC). How much it costs to acquire a customer.
• Customer Lifetime Value (CLTV). How much your customers contribute to your business over time of doing business with you. 

I’ll share more about how to determine your marketing sources in tomorrow’s email.