How much would you pay to acquire a client?

Artashes

Artashes

Administrator
Staff member
This question of calculating customer acquisition costs has always been an interest of mine.

This time, however, I wanted to ask the question differently. If you had an easy button (or a service out there) that would add a guaranteed client to your client base, how much are you ready to pay for each sign-up?

Obviously, prices will vary depending on class of service we are talking about, so please define the parameter when you are responding.

For example, $40 for a shared hosting client, $100 for a dedicated server client.

I am asking this question because the whole psychology of spending changes when you know you receive a paying client versus when you are designing your affiliate system and choose not to go over a certain amount (comes down to difference in risk). The objective is to understand whether the value of each such sign-up is exponentially higher than when you have to earn a client yourself.
 
For a client with a good track history I would be willing to pay up to 50% of an annual hosting plan.

If this client was paying $200/year for hosting I would offer up to $100.
 
For a legitimate client, whom I know will not leave unless provoked (bad support, downtime, ect..), I think 50-60% of the annual cost of the hosting plan is worth the risk.

Hopefully the client sticks around longer than a year and brings in some referrals too! ;)
 
This really depends on anticipated churn. If you're buying a firm that has a history of poor customer support, or poor bookkeeping, that ratio goes down. More often than not, those companies are depressed and facing foreclosure anyway. Even at best, we'd probably not consider higher than one to one.
 
Yea I'd pay up to 50% for one. Hopefully they will be recurring annually and bring customers in. And its always a possibility they could write good reviews on you that you can get even more customers. I think its a worth investment to build up a client base.
 
dsnetworks said:
We usually pay anyone with a referral 50% of the first months invoice price.
Click to expand...

Is that what you will pay to someone who would tell you tomorrow he will refer 1,000 guaranteed clients to boost your business? 50% of the first monthly fee? As I am specifying in my original post, we are NOT talking about what your usual affiliate commission is.
 
50% of the annual package price seems like a good price that many here use. Thanks for the info. I would be willing to pay this if I was trying to buy a client it seems fair.
 
I would pay half the price, a 50% margin is ok. But only for the first year. But why selling the customer if you could make the deal and keep the whole amount ;-)
 
It seems to be the standard, 50% of first year for a single client

But then you get companies that are offering clients in bulk.

You need to do some creative structuring before you make an offer on that type of deal, because You can almost bet that at elast 2-3% of the clients you aqquire will jump ship when they see they've been sold out to someone else.
 
PsyberMind said:
It seems to be the standard, 50% of first year for a single client

But then you get companies that are offering clients in bulk.

You need to do some creative structuring before you make an offer on that type of deal, because You can almost bet that at elast 2-3% of the clients you aqquire will jump ship when they see they've been sold out to someone else.
Click to expand...

I would put that number higher than 2-3% honestly. Even if they don't jump ship right away, there's a very good chance of them leaving if anything goes wrong. Dotable is a pretty good example -- if you check the testimonial section on their forums you'll see a lot of clients leaving after UK2 took over.

OT: 50% of the first year is reasonable. I have seen much higher rates though.
 
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