Bob Started

Using cost to acquire each customer is the most efficient way to measure your overall advertising effectiveness and choose advertising methods for your start up company.

Different advertising costs will be justified based on your gross margins per sale in your company.

For example, Pennza Mobile Detailing’s advertising cost per customer is usually somewhere between $15 and $20.

This number is found by taking the amount of money spent on advertising in a give time frame divided by the number of new customers within that time frame.  For example, if We spent $400 and acquired 20 new customers, our cost per customer acquisition is $400/20, or $20 per new customer.    while if my publishing company’s customer acquisition cost was that high, I’d be homeless.

Pennza has the ability to spend this much per new customer because $100 is the least expensive package we offer and the $20 cost per customer acquisition still allows us to have a competitive profit margin.

The New Publishing company’s advertising campaign will have to be much different.  At a price of $6 to $10 per magazine, spending $20 to acquire each customer is a luxury we will not be able to afford.

Some consultants let us know direct mail would be a good option for our advertising campaign.  Here is a breakdown of the best case scenario for a direct mail campaign (per 100 letters sent out).

This simple financial projection is a recipe for disaster.  The typical response rate of direct mail is from .5% to 2%.  In the likely scenarios, you will lose money every time.

Please keep in mind that this is a very, very simple projection.  We did not take costs into consideration for sales copy, scale for the amount of letters you will mail/other discounts, costs to buy or rent the list, and customer lifetime value.  We also did not put in any costs for taking credit card orders or revenue for additional subscriptions for the magazine per each customer.

This simple example and explanation should show you just how important financial projections are.  Just because a consultant suggests a direct mail campaign does not necessarily  mean it is your best course of action.

You need to research your industry and create a detailed set of financial data and projections in Microsoft Excel or Google Spreadsheets.  The financial data will help you build your marketing plan and operations plan for the business.  Keep in mind that you should research average response rate and costs for each type of advertising you plan on using.  For example, don’t assume email response rate will be 10% if you can find data online that average response rate is less than 1% (which is true).

Ultimately, we decided that direct mail and PPC campaigns (which we use for Pennza) would be too expensive per customer acquisition in the new publishing company.  We have chosen to use social media (specifically Facebook and Twitter) as well as a weekly “questions and answers “newsletter to find potential customers and attract them to our publication.  Although this will not allow us to grow as fast as direct mail might allow, it will help keep costs per customer acquisition low and will help us to create a profit before the end of the first year.  Most magazines don’t turn a profit until 3 years in operations.

Best Regards,

Robert M. Cavezza (Bob)

There are a finite number of ways to advertise your websites online.  There are a million different places to advertise.  I created a few internet marketing pointers that you remember when creating your campaign.

You Must Have a Marketing Plan

Having a plan is the key to every marketing campaigns.  For each campaign, you should have a goal in mind.  Your plan should include goals, objectives, your methods, a marketing time line, and financial projections.

Your Traffic Must Convert

If your intention is to sell a product or service, traffic is pointless if you are not creating revenue.  When creating a marketing plan, you should always find ways to create targeted traffic.

Make sure you advertise your website on websites and communities where the community will be likely to buy your product or service.  If you are selling dog food, join a pet lover’s community.  If you are selling financial tips, join a financial community.  The more specific you make you’re marketing efforts, the less likely you will waste money by reaching consumers who are not in your target market.

Use Links to Build Relevant Traffic

SEO has been a buzzword for a few years.  SEO efforts are overrated.  Instead of using social media and blogs to build meaningful relationships with a target market, most internet marketers spam blogs in order for Google to notice a link and (hopefully) increase their website’s ranking in Google.

Optimizing a website for Google is very important, but developing meaninful relatinships with blogger’s and important communities has been shoved aside for Search Engine Optimization recently.

Many marketers don’t consider that a considerate thought or comment could intrigue readers, increase your brand equity, and build traffic to your website.  Relevant blog comments result in increased credibility for your brand.

Using robots or paid “SEO specialists” to “spam” blog comments just for a link is not only unethical, but it will also hurt your website’s brand and alienate potential customers.

Lately, I have been very efficient, but not been very effective!

As Peter Drucker has pointed out, you have to do things right, but you also have to do the right things!  For the past few weeks, I have been toiling with an html template that was being hosted on Web Presence University.  I put a lot of work into making necessary changes to the design to make it fit my needs.  I must have spent over 50 hours customizing graphics, changing the stylesheets, colors, table displays.  When I think back to it now, it was a total waste!

I am now going back to the idea and setting up a simple wordpress site design.  I am going to create different subdomains for each service I want to sell.  The services will include search engine optimization, web usability consulting, and creating online resumes.

I realize now that there will be no need to have one site created for all of these functions.  I’m going to setup a quick wordpress theme and focus on selling the services instead on designing the perfect website.

As Norm Brodsky and Guy Kawasaki always say, perfection is the enemy of “good enough”.

For those who have never heard of BobStarted, this blog was originally hosted at bobstarted.blogspot.com and forwarded from bobstarted.com.  Since the blog started almost a year ago, it has changed a little over time, but has always kept to one core principle - help entrepreneurs make less mistakes by chronicaling my journey.  Here is the original introduction to the blog almost a year ago.

Hi. My name is Robert M. Cavezza and most of my friends call me Bob. I have been dreaming of being an entrepreneur since I was a junior in high school. Now, as a Senior at Rutgers University, I am proud to say that I have officially “started” my company and entrepreneurship dreams along with my partner and best friend since I was 8 years old, Nicholas Pennisi.

I have a few goals for this blog. First, I want to chronicle my life as an entrepreneur and have something to look back on in a few years. Second, I want to be able to help other potential entrepreneurs have a chance to take a first hand look at what really goes into starting your own business. Before starting, I read several books on startups and entrepreneurship and thought I was fully prepared to start. I soon realized that nothing could ever beat first hand experience and learning on the job. Third, I want to use this blog as a way to help others exchange ideas. I want this to help not only other companies, but my own company as well.

I hope everyone finds this blog useful and entertaining.

-Robert M. Cavezza (Bob)

As you can see, my writing style has changed since the first post.  Also, my business aims have changed.  I plan to attend Babson College in the Fall of 2010 to immerse myself in everything that is entrepreneurial.  I have been told that Babson is the best place to go if you want to be an entrepreneur.

Another goal of mine is to gross $1,000,000 in revenue before Fall 2010.  If I can attain that goal, I will be able to join a special program at Babson for high-achieving entrepreneurs.  My goal for this year is still to gain $100,000 in revenue.  I am not 100% sure how close I will be to that goal, but I will half half year estimates at the end of May.

I will have more updates in the coming days.  If this is your first time at Bobstarted.com, Welcome!

Best Regards,

Robert M. Cavezza (Bob)