Analyzing Your Marketing Spend: What Would You Pay for a Top Client?
$623,000.00 (total revenue generated) divided by 37 (number of A clients) = $16,837.83
Now what about attrition rate? How long do you keep your average client? In my case it averaged out to be about seven years. What is your average gross profit? For me it was around 54 percent. So let’s do the math.
$16,837.83 x 7 = $117,864.85 projected average run-rate over a seven year period.
Now if my margins run, on average, at 54 percent, then the math looks like this:
$117,864.85 x .54 = $63,647.01 x 37 (A-list clients) = 445,529.13 in profit.
So the question begs itself, what would you pay for an A-list client with the following profile:
- $16,837.00 in annual sales
- $9,091.98 in annual profits
- Seven-year attrition rate
- $117,865.00 in projected sales
- $63,647.00 in projected profits
When looking at the picture now, what would you be willing to invest in procuring a client like this? Hopefully more than a 79-cent product or an ineffective print collateral piece. When analyzing my marketing even today, I look at all of these factors to determine the effectiveness of my marketing as it relates to the “spend” and projected opportunities that may exist within an existing client.
In reviewing your marketing it is important to note one critical factor: "Marketing is the deal opener; sales is the deal closer." Too often business owners feel that the marketing should be doing the job of sales—NOT SO! Marketing is the introduction, the teaser. It is the catalyst for people to want to know, see or experience more of what you have to offer—therefore your marketing must be memorable, strategic. It must create a “wow” factor and look to hit emotional triggers that will cause action on the part of the recipient.