The High Cost of Free Customers

Free customers are like the “World’s Largest Christmas Stocking.” They look good from the outside, but when you start digging in, you find that the value is missing.

A few years ago, I won a raffle for the “World’s Largest Christmas Stocking.” It was so big I needed help carrying it to my car. It measure seven foot tall, three foot wide, and was filled with toys. Winning it was fun.

Opening it was disappointing.

Everyone in the family gathered around for the big event. The stocking was opened and one by one each item was removed. The children’s excitement transformed into annoyance before the stocking was empty. Instead of toys, it was filled with accessories. Every item included required additional purchases to be functional. “Bummer” was the word of the day.

When you analyze your free customers, acquired via the Internet, expect the same results. The excitement of acquiring new customers transforms into disappointment when you realize that they add little or no value to your business.

Most customers acquired through search (natural and paid) are looking for a specific product. They search for “lime green pillow” instead of “unique home decor catalog that matches my lifestyle and wallet.” When the perfect pillow appears, it is purchased, and the shopper transforms into a customer.

This is where it gets scary…

…at least for the company. The marketing cycle begins. Emails, catalogs, postcards, and other promotional pieces are sent to encourage the second purchase. The new customers are treated the same as ones acquired through traditional methods.

Your free customers are different. Most are hit-and-runners, looking for a single item or collection, never to shop again. If you spend $36 marketing to them over the next year, you have wasted $36! If you have 1000 “free” customers, that’s $36,000 off the bottom line. (Yes, I know you can do the math, but sometimes it is more effective to see it.)

Growing your house file is a good thing if you are acquiring customers with a long lifespan. Before you start celebrating the growth of your customer file, make sure that your acquisitions will improve your business. Learn how to identify hit-and-run customers before they break your bank!

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