BARTER: COST OF AQUIRING A CUSTOMER

COST OF AQUIRING A CUSTOMER
Author: Neha Gupta, Writer for Ormita Australia Limited

Barter marketing versus cash marketing….

The question as to why one should enter a barter network can be answered by doing a quick comparison between the cost of getting a new customer in the cash market versus the cost of getting a customer via a barter exchange / commerce network.

When you enter a barter network you increase your market base as you get new customers which the network, itself, brings you with little, or no, additional effort on your part.

The reason people are interested in making purchases from you using barter are as follows:

1.They are member of the same barter network as you.

2.They save cash (as they have earned barter dollars through selling their excess time or products via the barter network to customers they otherwise would not have had).

3.They need your services (but typically they would not have heard of you in the cash market and/or they have existing cash relationships which, without proper incentive, they would be unwilling to change).

4.They, in turn, acquire new customers (when you make a purchase from a business using cash you have no guarantee that they will purchase from you. When you purchase using barter dollars this money stays within the network and either that business, or another it spends with, will come back to buy from you – thereby creating repeat business).

Let’s analyze what would it cost to get this customer in the CASH market. To calculate that first you need to answer the following questions:-

Do you need more sales staff because obviously your existing sales staff is at capacity and/or this is growth over and above their ability to make new sales?

Would you need a new advertising campaign to attract the same number of customers in the cash market?

Would you need to come up some special promotion offers like discounts or free gifts to get the new customer base? If so how much and for how long?

How much for an advertising campaign to create the same amount of sales?

Is there any guarantee that investing this cash would REALLY generate the same amount of new sales?

As discussed earlier the reason people will purchase via barter is because it costs them less than using cash. These customers are not even a part of your cash customer base so the only guaranteed way to attract them is via the barter exchange network.

Secondly, in the cash market you must spend money on advertising, or discounting, in order to get new customers. In a barter network you only pay a commission of between 7% to 10% once you complete a deal with the new customer - not before – meaning that there are no upfront costs for attracting the new customer. You may even be able to use the barter dollars you have earned to buy advertising which, in turn, will attract more cash customers to your business.

Hence, if you are part of a barter or commerce network you not only get some new customers that are not available in the cash market but also advertising space which you can use to attract cash paying businesses.