Dan Kennedy explains how to spend more on customer acquisition by extracting more value from each customer. He walks through an exercise where you keep revenue constant while halving your customer count, and criticizes subscription models with cheap short trials that encourage churn instead of deeper monetization.
So where should we begin to search for more monetization?
In order to spend the most, you have to monetize the best. We're not back to one of those periods. In fact, we're still in quite the opposite, mostly because of inflation.
Hello, and welcome to this month's masterclass. I'm your host, Darcy Juarez. I'm here with Dan Kennedy. And Dan, you've done a lot of work figuring out every possible way for a business to monetize its customers. So I want to talk about that this month. But why so much effort?
Because the dirty little secret of advertising, marketing, of direct response, and basically a business in general is here you can spend, and we really should use the word invest, but here you can spend the most to acquire customers wins. And if you can't, it's hard to overcome that disadvantage. Certainly marketplace dominance is based on who could spend the most to acquire. So there's a very simple closed loop to that. In order to spend the most, you have to monetize the best. You have to get a lot more out of each customer than everybody else gets so that you can spend the most to get there. So as a. As a marketing consultant, it's. And as a copywriter, people are almost always coming to me with too low of a maximum allowable cost. So the question early in the day is, what's the most you can and will spend for a new customer? If I just hand you one right here, what's the most you will pay me for it? And the number is almost always a bad number. It is almost always too limiting in terms of who, how many different kinds of media you can afford to use and how deep you can go in using them. So in order for me to succeed with that client, I can't just write a better ad. I have to change their entire money math. I have to raise their maximum allowable cost. And so now I have to look at everything they do to monetize a customer and find all the things they aren't doing to monetize that customer that we can do to raise the maximum allowable cost. That is a huge key in business. And people go through periods of time. We had one prior to the virus. We had a period of time where money was running uphill, and a lot of business owners did very little to monetize each customer. And they were still doing very, very well financially. And it was a long enough period of time that you could be in business with no other experience. You could win a long bull market, a long boom, and you could be thinking that I'm a genius. And then suddenly you aren't a genius. So we're not back to one of those periods. In fact, we're still in quite the opposite. Mostly because of inflation outpacing wage growth growth by a significant percent. And so money is not running uphill. And now all of a sudden the need to fully monetize the customer you do get, you know, is critically important. And most businesses, many businesses don't adjust to it at all. And in many cases that's eventually how they go out of business. So like, I'll see somebody now, tell me something and like that's it. There's no effort to sell anything else. There's no effort to multiply me through referrals. There's no effort to do anything. And there was a period of time when that was okay and everybody made money. Now there's a period of time where that ain't okay. But if you want market dominance, it's never okay. Because even though you may pay all your bills, your maximum allowable cost to acquire a customer still stays too low. So.
So where should we begin to search for more monetization?
So let's start with the, the ugly truth that what people actually like least about the businesses they're in, almost without exception, is the acquisition of new customers. It's the most frustrating thing for most. It's the costliest thing for most yet it is the lifeblood of their business and, and so they focus on it the most. So you have this vicious cycle of we got to get more new customers, we got to get more new customers, we got to get more new customers. We can only spend this little amount of money to get them, but we, but we got to get more. Right? I noticed the other day because the whole streaming business model doesn't work. I noticed the other day Disney is running a three month, 199amonth trial. The stench of desperation comes through the screen of the television set and it can't work. All it does is actually support the bad consumer habit that has evolved that makes the business model untenable, which is subscribe for two or three months, binge the thing that you're really interested in seeing, then unsubscribe and subscribe to this thing over here. You don't stay well giving it to you for a buck 99amonth. Is it going to fix that? It actually teaches it right, right. Oh boy. We'll just sign up because it's only two bucks a month and we'll watch the 56 episodes of Star wars and then we'll disconnect. Isn't that wonderful? Right? But you see that problem, right, Occurring is we need a lot of new customers. So one of the conversations that I've always evolved in is how can we reach your financial goals with fewer customers? Because that will force you into full monetization. So if I say you made 200 grand last year from your business and let's total up the number of customers you got, and now let's cut that number in half and we still want the $200,000, now let's figure out how that could be possible. That's a really good exercise, right? So we dig in and we look at some people call it the life cycle of the customer, the journey of the customer, the time from first transaction to they're not a customer anymore.
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