How Much is Each Customer Worth for your Ecommerce Sites
Posted 02-04-2010 at 08:00 AM by addykho
How much is each customer worth for your online ecommerce business?
I am sure you always hear people saying that those who bought from you before will always buy from you again. They are more likely to become your returning customers, be it buying the same product or other products that you are promoting.
Before you start an online business, please make sure that you do not fall into the low end of any market and compete on the price with many others. Imaging if I am selling a product costs USD49 as compared to you selling a product costs only USD4.90. You may have to sell 10 products to make the same amount of money that I am making with only 1 sale (assuming the profit margin is proportionate). In normal circumstances, the higher the price the better the profit margin.
Of course it is acceptable if you have few OTOs (one time offers) or upselling following your first sale. Some people try to attract the potential customers to pay very little for the 1st product and then promote them the 2nd or 3rd products after they manage to close the 1st deal. This is a good marketing strategy because as mentioned above, those who purchased from you before will always buy again from you- people tend to purchase from someone whom they are familiar with or whom they trust.
So think about the products or services that you are going to sell online and see how you can make the most out from your customers. How much income can you generate from each customer per year? If at all possible, pick a product or service that can build a long term relationship with your customers and hence getting them to buy from you again and again. For example, you can sell a health product that demand repeated purchase from time to time. Or you can sell your membership site that charge your members monthly fee.
So back to the question- how much is each customer worth for your ecommerce sites? The rules of thumb from my personal experience is to generate minimum USD50 per annum from each customer. Why minimum USD50? Sometimes you may spend money on Google adwords advertising which costs you some money. If the cost for you to convert someone into a paying customer is 5USD. Then 5USD seems like a good bargain if you can expect each customer to pay you USD50 per year. If you know how much is each customer worth for your ecommerce sites, then you can budget your ads spending.
I hope you have grasped the idea that I am trying to convey to you now. If you are smart enough, you should be able to tell that ecommerce is a number game. If you have a website that generate USD50 per year from each customer, then you can have several other websites that generate the same amount of money from every single one of your customers. If you have 10 ecommerce sites that sell, then you are basically increasing your net-worth by 10 folds.
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I am sure you always hear people saying that those who bought from you before will always buy from you again. They are more likely to become your returning customers, be it buying the same product or other products that you are promoting.
Before you start an online business, please make sure that you do not fall into the low end of any market and compete on the price with many others. Imaging if I am selling a product costs USD49 as compared to you selling a product costs only USD4.90. You may have to sell 10 products to make the same amount of money that I am making with only 1 sale (assuming the profit margin is proportionate). In normal circumstances, the higher the price the better the profit margin.
Of course it is acceptable if you have few OTOs (one time offers) or upselling following your first sale. Some people try to attract the potential customers to pay very little for the 1st product and then promote them the 2nd or 3rd products after they manage to close the 1st deal. This is a good marketing strategy because as mentioned above, those who purchased from you before will always buy again from you- people tend to purchase from someone whom they are familiar with or whom they trust.
So think about the products or services that you are going to sell online and see how you can make the most out from your customers. How much income can you generate from each customer per year? If at all possible, pick a product or service that can build a long term relationship with your customers and hence getting them to buy from you again and again. For example, you can sell a health product that demand repeated purchase from time to time. Or you can sell your membership site that charge your members monthly fee.
So back to the question- how much is each customer worth for your ecommerce sites? The rules of thumb from my personal experience is to generate minimum USD50 per annum from each customer. Why minimum USD50? Sometimes you may spend money on Google adwords advertising which costs you some money. If the cost for you to convert someone into a paying customer is 5USD. Then 5USD seems like a good bargain if you can expect each customer to pay you USD50 per year. If you know how much is each customer worth for your ecommerce sites, then you can budget your ads spending.
I hope you have grasped the idea that I am trying to convey to you now. If you are smart enough, you should be able to tell that ecommerce is a number game. If you have a website that generate USD50 per year from each customer, then you can have several other websites that generate the same amount of money from every single one of your customers. If you have 10 ecommerce sites that sell, then you are basically increasing your net-worth by 10 folds.
Add me on FaceBook
Add Me On Twitter
Check out my Blog- http://addykho.com
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