October 13, 2013

Dear B2B Catalog CEOs: Payback Period

Dear B2B Catalog CEOs:

There's a significant difference between you and your B2C cousins.

In B2C marketing, you're acquiring a customer that has a 40% chance of buying again, and if the customer buys again, the customer might purchase 3 times at $100 each over the next three years. This nets the B2C marketer $120 demand over three years. After backing out expenses, you're lucky to take home $25 profit. This means that the B2C marketer cannot afford to lose a ton of money acquiring customers.

In B2B marketing, you're acquiring a customer that has a 30% chance of buying again, and if the customer buys again, the customer might purchase 3 times at $400 each over the next three years. This nets the B2B marketer $360 demand over three years. After backing out expenses, you're blessed to take home $70 profit.

If the B2C marketer is taking home $25 profit over three years, and the B2B marketer is taking home $70 profit over three years, then the B2B marketer has a major advantage - the advantage of a stronger/longer payback period.

The B2B marketer can invest - almost over-invest - in new customers.

Your mileage will vary, of course.

But it's worth pointing out that if your AOV is north of $300, you have an opportunity to greatly ramp up your customer acquisition activities - investing today to protect the future of your business.

When you work with the folks at Merit Direct or your preferred vendor - focus less on all the technical stuff - focus on how much you can truly invest. Or email me (kevinh@minethatdata.com) and we'll figure out just how deep you can invest.