Hello all,

We are currently writing a business plan to acquire some investors to grow our hosting Business. One of the financials we need to include is the cost of acquiring a customer. Can anyone give me some Idea and the return on adverstising that it tales to get a customer. Or if anyone knows of marketing or management companies that guide us in these matters it would be appreciated.

All the best
Chuck Baldo
cbaldo@remove.for.nospam.globalwindows.com

someone out there will give a better defined response but here is my knowledge.

cost to obtain:

click rates on banners : have not seen greater than 1.86 % have average of about .23%

cost of banner programs to specific markets ( geographic: 9.00 cpm, community 12.00 cpm, industry 6.00 to 18.00 cpm, super targeted 26.00 per cpm )

I can say that it cost about 12 to 21 to get each customers, that customers breaks even on average after 3 to 5 months. but the more refined your targeting the better your click rate the fater the return, cost per client drops down. it's just that most people will not drop 1000 just to test there ideas. simple as that.

mike

that's one of the more curly questions I've seen in a while, and has no real answer. It will totally depend on a companies spending. Overture was listing webhosting at $8-9 dollars a click last time I looked, while dedicated was close to $22 a click!

At the other end of the scale are businesses like ours who use virtually no paid advertising at all (or at least a minumum amount). Cost of aquisition runs the gamet of all levels, depending of the aggressiveness of the approach. The best way would be for formulate an advertising plan beforehand, then work out costs on that individual basis.

Greg Moore

We have campaigns as Greg mentions which are basically free. These include typical search engine submissions and free directory listings. Also, news and pr releases are basically free.

Affiliate programs are typically the next most efficient campaigns.

Then you go into mass run pay per impressions which run a wide gamut depending on effectiveness and demographics.

And, if you limit your pay per click bid, they can be effective from a cost per account, but you will be way down the list so the number of accounts will be limited.

Target direct mail works for some, particularly in local markets.

Newsletter ads are normally quite inexpensive per recipient but vary widely in effectiveness.

That said, we use a combination and use cost averaging, in that we do a lot of inexpensive promotion, then to maintain our signup rate per our business plan, do only the required amount of expensive marketing. We balance to maintain both desired sign up rate and overall cost per acquired customer.

Chuck,

For business plan purposes and in raising capital it is best to use a specific dollar figure which takes into account both the variable costs and the fixed costs of running your service.

Based upon current purchase prices for hosting companies, the typical customer is worth between 0.75 to 1.5 times revenue which on a historical basis is quite low.

In the salad days we were seeing 10 times revenue per customer so getting customers through Marketing was seen as more cost effective.

Today to VC's it appears more cost effective to buy customer bases for the same reasons.

So the cost of obtaining a customer for shared accounts should be less than $240/user assuming a $20/mth average package price.

Recently, Interland CEO was quoted as saying their cost of acquisition through direct means was at least $500/user which is the reason why they are currently on a buying spree.

I hope that helps.

Franc

Hire sales affiliates. Make their customers signup with a three month contract and pay the sales person two months profit of that customer.

Advertising is free :). Get listed in webhostingdir.com.

I just did it last week and got 5 new clients, since I've opened I have spent a GRAND total of $30 on advertising. Although it's not the best solution if you're trying to get huge fast :\. At a rate of 5 clients per week you need patience ;).