Customer lifetime value

Marketing tip #83: Less but better

February 29, 2012

I just wrapped up a 4-part webinar that focused on creating a marketing plan that you’ll actually use.  The final element we covered was marketing tactics.

Now that I know why I am doing this (goals), who I am talking to (best customers), what to say to them (key messaging), how much I can afford to spend (lifetime value of a customer) and the stories I can tell to generate interest, word of mouth and attraction — WHAT am I going to do?

Most people are looking for some secret answer.  The one marketing tactic that they hadn’t heard about or the trick to doing something in a way that no one else has heard of.  That’s actually not the secret.

The secret is — before you add more marketing tactics, take the time to examine what you’re already doing and ask yourself — could we do this better?

You’re far better off to do fewer things but do them better.  Less but better is greater than more.  Seriously – repeat after me.  Less but better is greater than more.

Look at the marketing tactics you’re already deploying.  Could you do it:

• Better?
• More often?
• More consistently?
• More fun/funny/memorable?
• More professional look/feel?
• Shift from being about us to being about them?
• More storytelling and less telling?
• Give up some control and let your audience drive the conversation?

Before you add a thing — add some quality, value and depth to what you’re already doing.  That may be exactly what needed to be added.

No small business has the resources (time or money) to be everywhere.  So be significant and memorable in the few places you choose to be.  Less but better really is greater than more.

 

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5 questions to define your 2012 game plan

December 30, 2011

Define your 2012 game plan

Over the past month, I’ve been posing what I hope have been some head scratching, thought provoking questions to help you get ready for 2012.

If you can answer these five questions — I think you’re going to have a solid foundation for your marketing efforts moving forward.

In case you missed one, here are the five questions (with links to the whole post):

1. What do you really sell?
2. Who is your ideal customer?
3. What’s the lifetime value of your customer?
4. What’s your marketing foundation?
5. What’s your legacy sentence?

So — have the questions changed your plans or focus?  Narrowed things a bit?  Or were these all a slam dunk?

Happy New Year and here’s to a very prosperous, joyful 2012 to you and yours!

Stock photo courtesy of www.BigStockPhoto.com

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Marketing Insights Question: Calculating the lifetime value of your customer

December 12, 2011

What is your customer worth to you?

Over the next few weeks, as we head towards 2012, I want to get you thinking about your business in a new/fresh way.  I’m going to ask a single question in each post — but I’m warning you, these aren’t slam dunk questions.

I’m hopeful that as you ponder my question — it will give you some ideas for making 2012 a break out year for your organization.  If nothing else — this exercise should fine tune some of your marketing efforts.

What’s a customer worth? I’m always surprised when people don’t know the answer to this question.  If I said to you “for every $100 you give me, I will give you a client” – is that a good deal for you?  How about for every $1,000?  $5?

The truth is, most business owners have no idea what a customer is worth to their business.  If that’s the case – how do you know how much you can afford to spend to get one?

Why does this matter?  What kinds of decisions do you think you’d make in terms of acquiring new clients if I told you that over the lifetime of your relationship, every one of them is worth $500 in profit?  How would your choices change if I said each one is worth $10,000?

How do you figure out the lifetime value of a customer?

You need to know this number.  (Want to bet that your ideal customers are worth a heck of a lot more than your so-so customers?)

Not sure how to calculate the lifetime value?  Check out this great infographic (from kissmetrics)which does a nice job of modeling how you can get a good ballpark figure.

Once you know that….you know what you can do to earn a customer.  And what it costs you when you lose one.

Lifetime value of a customer infographic

 

Stock photo courtesy of BigStockPhoto.com

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How much should you spend on marketing?

September 15, 2011

How much should you spend on marketing?

I know I need to do some marketing but how much should I spend?  How much do other companies my size spend?

This is probably one of the most asked questions of marketing agencies and consultants.  If you google the phrase, there are 17+ million results.  And yet, we keep asking.  So let me see if I can drill down to the heart of it.

One of the reasons why it’s on everyone’s mind is because there is no magic answer.  No one solution.

Before we get into the methods of determining a right answer, let’s be very clear about these two points:

1) The exact amount matters less than having an amount.  In other words, having and tracking a marketing budget, even if your initial number is off, is much more important than getting the number exactly right.

2) You can have the right budget and spend it on the wrong things.  A marketing plan should always be tied to a strategic marketing budget.

Now, let’s tackle the question.  Here are some of the more effective ways to set a marketing budget:

Percentage of gross sales/revenue:

This is probably the simplest method.  Most experts recommend somewhere in the range of 2-8% of gross sales.  McKinsey & Company is often quoted at 5%.

Most small businesses (less than $5 million gross revenue) should shoot for at least 7-8%.

Industry-specific:

Many industries have their own standard.  For example:

• Consumer package goods:  Up to 50% of projected net sales to launch a new product
• Industrial B-to-B:  1% of gross sales
• Retail:  4-10% of net revenues
• Banks/Credit Unions:  2-5% of assets
• Law firms:  1-4% of gross revenues
• Pharmaceuticals:  Up to 20% of net sales
• Hospitals:  1% of net revenues

Lifetime value of customer:

The idea is simple. You identify how much profit (on average) you make during the lifetime of that customer relationship and determine how much you are willing to invest per customer acquisition.  If you choose this method be very careful that your numbers are accurate.

Goals/Plan driven:

The thinking behind this method is really a blend of some of the others.  Identify measurable goals (# of new clients, % of revenue increase, etc) and then determine your sales equation.

For example:  For every 100 prospects approached, you get 25 initial meetings.  From those 25 meetings, you can expect to get 12 invitations to present a proposal.  From 12 proposals, you will score 4 new clients.  If your goal is 20 new clients, you now know that you need to approach 500 qualified prospects.  You build your marketing plan to accomplish that and assign the costs accordingly.

Again, this method requires very accurate numbers to make the equations viable.

So what do you think?  Which method do you currently use?  If you don’t have a marketing budget, which method do you think would serve you best?

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