In business, it all comes down to numbers, right?
There are things like ROI, COG, break-even point…not to mention everything that has to do with investing and accounting.
BUT, I want to get you thinking about your people numbers. Every number you look at represents people. People buy and people work for you.
If you have never heard of people numbers, you may be missing some key numbers for your business. We are going to look at the cold hard fact of these numbers, but we are going to keep in mind that all of those numbers represents someone who you have helped.
I won’t go into all the people number or this article or it will be pages long. Let’s focus on two particular numbers: conversion rate and lifetime value of a customer. Hopefully, these figures will help you see that your marketing and advertising is invested in helping people.
When you do any kind of marketing or advertising, you usually track how many leads you get. It is easy to see that 100 people came to your website and downloaded your coupon. This number is not good enough. You need to know how many of those leads actually came into your store and how many purchased.
If you know your conversion rate, you will know the ACTUAL cost of your advertising and marketing. You will know how many people you helped, not just how many people saw your ads.
The next most important number you need is the lifetime value of your customer. The gist of it is when a customer buys from you, how long till they buy again and how long do they stay with your company.
Many businesses lose out on this number because they don’t care for customers who have already bought from them. As a matter of fact, it take five times as much money to reach someone unfamiliar with your company as it does to sell to someone who has already bought from you. When you understand the lifetime value of your customer, you can invest on caring for them once they have purchased with you.
What can we do with these numbers
When you put these two numbers together, you have some basic people numbers. You can track how effective your marketing and advertising is in reaching people…you can track how many people you have helped with your business. Plus, you can track how much a customer actually spends with your company so you can better help them in the future.
Mange these two numbers right and you can turn on the spigot of money because you realize that investing in your marketing is helping people.
Quick case study
Let’s say Ralph owns an auto shop. He knows that the average customer will spend about one hundred dollars a month with him. He also knows that his average customer stays with him for twelve months. You can see that the value of a customer is twelve hundred dollars.
He also knows that his conversion rate is twenty percent. One out of every five leads will become a customers.
If Ralph uses one hundred dollars to get a one new customer, he has gained eleven hundred dollars. He knows he can pay less for marketing, but he is not afraid to make bold marketing moves because he knows his numbers. He knows that he can help more people if he can get in front of them and effectively communicate how he can help.
Ralph does not focus on the investment in dollars; Ralph focuses on the people he can help and how much he can invest in helping more people.
What to do with these numbers
Figure out your conversion rate. Divide the number of customers by the number of leads from your last advertising or marketing campaign. That is your conversion rate. (You can also use that number to see how much your advertising and marketing actually cost your company.)
Figure out the lifetime value of a customers. Look over your books, how long does a customer usually stay with your company? How much do they spend over that time period? Multiply those two numbers and you get the lifetime value of your customer.
Now you decide what you need to do for your business based on these numbers.
Do you need more customers? It’s simple, help more people! You can only help more people if they know about you. Invest the appropriate amount of money for customer acquisition based on your people numbers.
Do you need more profits? It’s simple, find new ways to help your current customers! Helping your customer better will increase their lifetime value and show that you care about them.
In either case, you will want to develop a strong follow-up system to keep your name in front of your customers and show them that they are not forgotten.
The process is pretty simple if you understand your people numbers. We can help you figure out these numbers and much more if you are ready to grow your business. We offer complete business consulting to get your business to profit quicker. Get your business growing today.