„Is our Lease too high?“ was the
question I have had in my mind for the last month or two. I mean – 15% of
everything we sell goes to a rich guy (or a half-dozen of them), sitting in a
comfortable chair in his over-priced office in God-knows-where?!
„Is it too much? And how much is
okay?“ kept bumping in my head. All day long.
Then one day I woke up with a
paradigm-changing idea in my head. It gave me a completely new perspective of
looking at this COST. Here it is, this idea. Explained. Step by step.
So – I know you calculate your cost
per visitor. You think it’s calculated like this:
Total Marketing Cost / # of Visitors
You take all your Marketing Costs and
divide this number of $ or € by the total number of (new) visitors. Yes – it’s
very hard to calculate if you want to do it precisely and only for new ones! It
means that you have to subtract the no. of repeating visitors from the no. of
all of them. It’s pain in the ass, believe me, unless you have a super tech
face-recognition stuff installed. And most of us don’t.
OK, let’s say that the approximative
(and quite precise) formula is the one I’ve mentioned above. And it’s very well
explained in this
article, too. And there’s nothing paradigm-changing. Yet.
So – what has happened a few days ago
is that I’ve realized that this formula is incomplete. It doesn’t take into
account REAL Customer Aquisition Costs. And here comes into the scene our
ever-loving LEASE COST!
I think the
LEASE COST should be on the left side of this equation, too! The equation should
look like this:
So, you think I might be crazy to put
LEASE COST in the formula, too, but let me ask you a thing: Imagine having THE
SAME shop you already have (same no. of square meters, same window, same
furniture, same people selling the same stuff) in a picturesque Scotish village
with 200 inhabitants. How many visitors per day would you have then? Less than
now, right? Yeah, dude, much less! You would pay your lease a couple of
dollars, right, but would it make your business more cost-effective and would
you make more money? Got it?
Now – imagine having the same shop on
the 5th Avenue or in Harrods. Oh, I can see a smile on your face! That’s the
attitude! Now – think about your lease cost! Much, much higher than in a small
village. So – the difference between those two is THE PRICE YOU PAY FOR THE
VISITORS! Yes, yes! Our Rental Fees, Lease, or whatever you call them is the
price we pay for the visitors (and we’re not just paying for ANY visitors – no
– we want visitors with deep pockets and in a buying mood!).
So – the guy in the comfortable chair
knows what he’s taking the money for. And he’ll keep doing it, believe me!
That’s the reason I’m putting this
cost into the formula where I calculate how much I really pay for one visitor
who enters my Store.
It’s not only the Marketing that
influences the number of them coming in! No – it’s the location (and therefore
the LOCATION cost goes into this formula), and, to be honest, it’s the look of
the window and the store, too. So, if I want to be very, very precise, I have
to put this into the formula, too.
So, let’s summarize. Here’s how I
calculate my cost per visitor:
As I have mentioned before – this
formula is more precise and gives me a more realistic answer to an ever-lasting
question: Am I paying my lease too much?