Marketing by numbers
Marketing by numbers is about approaching marketing as a professional. Amateurs waste money and go on gut feel, professionals are commercially minded and use numbers to help them get the most from their marketing.
There are lots of numbers in marketing including the number of customers, average spend, hits on your Website and your email open rate but one number above all will determine your entire marketing strategy; that is the Lifetime Value of a customer. Once you have this, you can work out how much you can afford to spend to acquire a new customer.
You really must have these numbers before you do any marketing because they give you massive leverage. You will be able to do things your competition will not understand and your customers will respond to.
The lifetime value of a customer is how much profit this customer will give you over the time they do business with you. And, I recommend you take into account referrals because they should be a key part of your marketing.
So, let’s use the example of an accountant whose average fee is £2,000 and let’s say they make £500 profit after allowing for all overheads, employees and a notional salary for the owners time. If that client stays for an average of seven years the client is worth £3,500. But, if they refer three other clients in that time, their value goes up to £10,500.
Now, a typical accountant is unlikely to recognise the lifetime value of a client because Lifetime Value is a marketing concept. Instead, they will think a £2,000 client is worth about £2,000, because that is how accountancy firms are bought and sold.
They will probably only want to spend £500 to win a new client, because they are always trying to make a profit. The trouble is, £500 is not a very generous budget and this may compromise the entire marketing strategy because they fail to invest enough time, energy and money putting together and managing campaigns.
However, if they embraced the Lifetime Value of Customer, then using the same percentage of 25%, they would be happy to pay £2,000 to win a new client. This means the accountants can afford to invest in professional marketing. They can buy a quality database, mail more than once, follow up and engage the client with numerous meetings.
Having this mindset means you can afford to make compelling offers and provide a bit extra support in the early stages of working together to build a solid foundation.
So, before you move forward on your marketing, do two things:
1. Work out the Lifetime Value of a Customer
2. Calculate how much you are prepared to pay to buy a new customer
When you have these numbers you must also make a commitment to manage your marketing by numbers. Everything should be tracked and reported on. You need to innovate, orchestrate and quantify. Come up with an idea, take action and measure the results.
Always test first and it’s useful to assume the test will fail. This will help you put it into practice quickly.