LifeTime Value of a Customer
I recently taught a workshop with Howard Cox of Sommerset CPA’s. The central theme of the class was building an ROI based marketing budget. To do that, you must begin with a look at the numbers behind your business. Why? Because when it comes to marketing, it is all about the numbers.
- How much does your average customer spend?
- How many years does a client stay with you?
- How larger is your referral base?
- How good is your closing ratio?
Use this worksheet to help you analyze the “numbers” which should drive your marketing decisions! Click here to download the Lifetime Value of a Customer Worksheet to begin analyzing your marketing budget foundation today!
If you need help completing the form, give us a call. We would love to talk to you about your marketing budget!
Marketing Organization Begins with a Budget!
About a year ago, I wrote a post about a Marketing Organization Chart which looked at the four key elements of your marketing plan: Strategy, Lead Generation, Conversion and Customer Service. While all the pieces are important, I would like to take a closer look at the impact of customer service on your overall marketing budget.
Many firms make the mistake of spending the bulk of their marketing funds on new customer acquisition, and very little on retention. In most cases, this is a huge mistake. Why? If you have existing customers, people who know and like you these are the people most likely to buy your new products and refer you to others who might use your services as well.
To understand the value of a customer, think about what that customer will spend, not just this year, but over the next few year. Consider also, what the impact would be on your business if that client introduced you to at least one other person who became a client.
How much is a customer really worth? And how much should you be spending on retention vs acquisition activities? Working with Howard Cox, an accountant at Sommerset CPA’s, I have created a model which will help you analyze your own business.
We will be demonstrating how this model works in a FREE seminar on January 26th. Seating is limited, so be sure to reserve your seat by filling out the form below. When you do, you will also be given an opportunity to download our LifeTime Value of a Customer worksheet.
To learn more, check out the short Podcast interview with Howard Cox. Click here to listen to the interview.
Common Goals Drive Actions
When I was Vice President of Creative Services at Conseco, we were always out of literature for key products. ( And in the insurance business literature is all you have to sell from.)
Our back-order list was close to 300 different items and climbing. There had been numerous meetings on the subject, but very little action. So I stopped talking about procedures and policy, and asked a simple question.
If our goal was a back order level of 100 what would we do?
The defined target gave a focus to our discussions. It was no longer a vague “get better” but a very specific goal, and every day, we knew exactly how far we were from our target.
Set a time line: To add an incentive, I offered to take the print team to any restaurant in town, if we hit 100 by September. 1, Applebees if we made it by October 1, and McDonalds on November 1. The date gave us the sense of urgency we needed to keep this in the forefront.
Weekly Debriefs
We kicked off every production meeting, with a brief conversation about the back-order list and the ideas started flowing. We began to tag projects which were associated with back order items with red flags. Everyone, even teams supporting the print staff (editors, designers, writers) all knew if something with a red tag landed on their desk it was their first priority.
Progress Tracked
Slowly the numbers started to improve; 275, 245, 225 . Every morning when the back order report arrived I would post the results on the wall. We could see real time results of our actions. We identified the actions which made the most impact, and made sure to focus on those items.
Involve Others
And the numbers continued to fall; 199, 175, 150 . We began to talk to the other department representatives who often had to approve the reprints about our red tag priorities, and suddenly they gave these items top priority as well. We hand carried rush jobs across the 11 building campus instead of waiting for interoffice mail ( good thing it was summer)
Our printer knew these jobs were always first in line, and even if we paid a rush charge every now and then, it was worth it to fill the back orders. Then our arch enemies, the inventory department, the people who believed we were solely to blame for the inventory mess called to find out what we were doing differently. They wanted to know what they could do to help. We asked them to run reports of items close to zero, so we start the reprint process before we hit crisis level and the numbers got lower; 140, 125, 109.
On September 1, we went to Lunch at Cafe Nora. When my boss saw the bill for the lunch she didn’t’ bat an eye, because no one ever believed we would be able to achieve this goal. No one but me! And the cool thing was that the back orders continued to fall. We still made little tweaks, but with a good system in place, we got ahead of the curve, and managing back orders became easier.
In February of the next year, the back order list was blank. For the first time since that report had been run, our back orders were zero.
There are several important lessons for small business owners in this story:
1) Define your goals, with a specific time line
2) If you are serious create and follow an action plan
3) Track your progress
4) Involve others, do not assume you can do it on your own. We would never have succeeded with out the support of the printer, inventory team, and other managers.
Now is a great time to define new goals, but don’t stop there! Build a plan, track your progress, and involve others if you want to succeed!
Seminar – Marketing By the Numbers Jan. 26, With Howard Cox
Good marketing begins with a budget based on the numbers which drive your business. As 2010 kicks off, this is the ideal time to build a marketing budget for your business. To help our clients and friends start this process, Howard Cox of Somerset CPA and I will team up once again to teach Marketing by the Number
In this workshop we will show you how to build an ROI based budget. Howard will show you how to calculate the Lifetime Value of a Customer and how to use this a a starting point for your marketing budget. Then I will explain the relationship between leads and closing rates, referral percent and advertising targets to determine where you should be spending your money!
There is no fee to attend the program, but RSVP’s are required. The class will be held at the offices of Somerset CPA, 3925 River Crossing Parkway, Indianapolis, IN 46240 on January 26, 2010 from 8:30 – 10:00. Note the time change: 8:00 – 9:30!
To reserve your seat, fill out the form below.
Episode # 10 – Marketing in a Down Economy
About a year ago, Ingrid Cummings invited me to be a guest on her radio program Rubicon Salon. In the course of the hour, we talked about marketing, social media and staying ahead of your competition in an economic downturn.
While the entire program is too long for More Than a Few Words, I thought it would be fun to share a few excerpts over the next few weeks.
In this first segment, we talk some of the strategies small business owners can employ when the economy slows down.
From the interview: “When everyone is pulling back it is a wonderful time to invest. It is easier to look bigger then you are”
And now, as the economy is starting to pick up, those same strategies will work. Don’t wait for a full blown recovery, it will be too late. Start investing now!
Click here to listen to the interview
Start Planning with Analysis
Whenever I want to use my GPS or Google map to find a location, I have to figure our where I am first. The same is true in business, before you can develop a comprehensive marketing plan to take your business forward; you have to have a starting point.
When we work with clients to develop their marketing plan, we often use a two part assessment to help them evaluate where they are and where they want to be. This gives them a starting point for the general direction, and emphasis of their marketing plan.
Part One: Where are You?
- What do your clients think of you and why.
- Who are your most profitable clients?
- What are the purchase factors which motivate clients and drive their decision
- What are your barriers to selling?
- What are the characteristics of your typical client
- What are the characteristics of prospect who rarely become clients?
- What do your clients think about you?
Part Two: Where Do You Want to Be?
- Who is you ideal customer?
- What are their problems which you solve?
- What are the benefits of buying from your company?
- Define solutions to eliminate buying frustrations.
- Identify buying objections and define solutions to overcome them.
If you are ready to start working on your 2010 marketing plan download our free marketing assessment to frame your thinking!
Marketing By the Numbers
There is a common misconception that marketing people can’t add. People assume we view numbers as graphic elements, simply using the prettiest one. But that is not true, good marketers know it is all about the numbers.
That is why I am so excited to be team teaching Marketing by the Numbers with Howard Cox of Somerset CPA. We will look at building an ROI based approach to marketing. We will focus on using the relationship between leads and closing rates, referral percent and advertising targets to determine how much you can afford to spend on marketing, as well as where you should be spending your money!
The class will be held at the offices of Somerset CPA, 3925 River Crossing Parkway, Indianapolis, IN 46240 on Tuesday, November 10th from 8:30 – 10:00. The fee is only $35 for members and non members of Rainmakers. Seating is limited to reservation are required.
Business Plan Lesson 9: Appendix
This is the ninth of our 10 part series on business planning If you want see all the posts sign up for the Free Weekly Business Planning Series and recieve a blank business outline too!
Embarking on a long trip, it is wise to pack an extra bag, taking along things you might need along the way. In your plan the appendix is your extra bag. It contains anything else you would like to share with your readers.
The appendix is where you put all the other “stuff” which is important, but doesn’t seem to fit anywhere else. For example:
- Expanded product descriptions, technical specifications, and patents
- Comprehensive financial statements
- Certifications, licenses and contracts
- Newspaper clippings, testimonials, and letters
Your Assignment:
Share with other readers what you will be including in your appendix section.
Ready for another conversation about business planning. We are still holiding 30 minute weekly discussions every Wednesday at 1:00 Eastern time. Your fee to participate is still $5.00
Business Plan Lesson 8: Executive Summary
This is the eighth part of a ten part series on business planning. If you want to start from the beginning, sign up for the Free Weekly Business Planning Seriesand recieve a blank business outline too!
Although it appears at the front of the plan, a good executive summary is written last. The summary captures the highlights of the entire business plan document, just as a traveling itinerary reflects the key happenings of a trip but does not account for every minute spent.
The executive summary should be clear and concise, and between two and three pages in length. Lenders, investors, and venture capitalists receive far more business plans than they are capable of funding. You must grab the reader’s attention so he or she is willing to dig more deeply into your opportunity.
Include:
- List your company name, type of business, location, and legal status..
- Describe the current state of the company, readiness for market; past successes, and key staff.
- Describe your products and services. Include the date the product was introduced, present volume, and unique features.
- List the reasons customers need your products. Include an indication of your market size and growth potential.
- Summarize aims and objectives for the short and long term.
- What strategies will you employee to reach these goals?
- What key facts do you want potential investors to know about company finances, either current or projected?
- How much funding do you seek, how do you plan to raise funds, and how will you spend the funds?
Are you ready for an independent review? At Roundpeg we have reviewed hundreds of plans over the years helping small business owners like you put the finishing touches on your plan. Contact us today for more information about our review services.
Your Assignment
Review your entire plan, highlighting the elements to be incuded in your executive summary
Technology Will Enhance a Good Plan
More than twenty years ago, I took my first ( and only) computer programing class. We spent weeks documenting manual systems. Why? Because my professor believed you could not fix bad processes by automating them, you just made the problem worse.
I think the same is true for PR. Right now, there is a mad rush to embrace social media and on-line PR. But good PR transcends the medium, and is built the premise of delivering messages to a specific target audience.
While I love “new media” it is not right for every application. To be effective, do your homework and create a well thought out PR plan which considers target, message and medium. Without a solid plan, no technology can save you.
