What it costs you to move a buyer one stage further

4 days ago
3 min read

Updated: 2 days ago

Introduction

Cost per acquisition is the number most businesses know, and it is an average across a process with very different costs at each step. Getting somebody to enquire might cost thirty pounds of advertising. Getting that enquirer to a quote might cost two hours of survey and travel. Getting the quote to an order might cost three follow-ups and a revision.

Splitting the total into per-stage costs changes where you look for savings. It routinely reveals that the expensive part of winning a customer is not the marketing everybody argues about but the unpaid work done in the middle, which nobody has ever costed because it does not arrive as an invoice.

1. What it costs you to move a buyer one stage includes your own time

The part that is usually invisible.

Advertising has an invoice. Surveys, quoting, follow-up calls and revisions do not, and they are frequently the larger cost. Time at a realistic hourly rate belongs in the calculation. Use the rate you would charge for that person's time, not their wage, because the hour had an alternative use.

2. Calculate each stage separately

The method.

Total spend and hours attributable to a stage, divided by the number who entered it. Four numbers per stage. Rough is fine; the comparison between stages is what matters, not the precision of any one. An afternoon with a spreadsheet produces something good enough to act on.

3. Include the cost spent on people who do not progress

The correction that changes everything.

Ten surveys producing three quotes means the cost of a quote includes all ten surveys. Costing only the successes understates every downstream stage substantially.

4. Expect the middle to be the expensive part

The usual finding.

In service businesses, the enquiry-to-quote stage is commonly the most expensive per person because it consumes skilled time. Firms that discover this stop trying to reduce their advertising and start qualifying earlier. The advertising was never the problem; it was simply the only cost with an invoice attached.

5. Compare the cost against what a stage improvement is worth

The decision the figure supports.

If moving quote-to-order from twenty-five to thirty-five per cent is worth twelve thousand a year, you know what you can justify spending on it. Without stage costs, that conversation is opinion.

6. Watch the stages you are subsidising

A specific finding.

Free surveys, free consultations, free samples and detailed proposals for unqualified buyers are all real costs delivered before any commitment. Some are worth it and all should be deliberate.

7. Use it to price qualification

Where the saving usually is.

If a survey costs you two hours and only three in ten proceed, a qualifying question that removes two of the seven pays for itself immediately. Stage costs are what make that trade calculable.

8. Compare stage costs across sources

The allocation insight.

Referral enquiries frequently cost more to acquire and far less to convert. Total cost per customer by source is the number that should drive the marketing budget, and it needs stage costs to compute.

9. Recalculate annually

Costs drift.

Wage costs, travel, advertising rates and your own conversion rates all move. A stage cost model built two years ago will point at the wrong stage, quietly.

Be careful about cutting cost in a stage that is doing useful work. A survey that costs two hours may be why your quotes are accurate and your jobs profitable, and removing it to save time can be expensive in a way this calculation does not show.

Conclusion

Cost each stage separately, because the average conceals where the money actually goes.

Include your own time at a realistic rate, attribute the cost of everyone who entered a stage rather than only those who progressed, expect the middle to be the expensive part in service businesses, use the figures to value a conversion improvement in money, identify what you are giving away before commitment, price qualification against the stage cost it avoids, compare total cost per customer by source, and recalculate once a year.