Analyzing Your Marketing Spend: What Would You Pay for a Top Client?
Now I may be dating myself here, but can you remember the old ice cream bar jingle for Klondike Bars? It went like this: “What would you do for a Klondike Bar?” People would do crazy stunts such as chirp like a bird or make an elephant sound in a crowd of people. Well, when I saw a rerun of that commercial recently, I thought, "What would someone do for a good client?" Or better put: What would someone pay for a good client? When we review our marketing, we are doing just that, investing in the opportunity and possibility of getting a new client, or generating new or existing business. Most people do not know what it costs to get a new client—in fact, most rarely, if ever, analyze their marketing spend to see if it’s viable and cost-effective.
As I consult globally, I am amazed at how ineffective most businesses market themselves. As business owners it is critical that we differentiate and set ourselves apart, because if you are not different, you are the same! Now is the time to seize that opportunity.
This article will be a mathematical analysis of your marketing. You can add or delete zeros at will—the bottom-line is the same. I have used arbitrary figures, but you can plug in your specifics to see the outcome. (These are my numbers when I was a marketing consultant.) Most people today are looking for that Holy Grail idea that will help them get new business, but in today’s market there is nothing cookie cutter that will be effective across the board. Marketing today MUST be strategic and laser focused in order to be effective—that’s the beauty of strategic marketing utilizing promotional marketing—and most importantly, if done correctly, it’s measurable.
So, what exactly is your ideal client worth? What would you spend to get that new client? How much does your best client spend with you on an annual basis? And better yet, what is the profitability, long term, of that client? Take and evaluate your client list and separate them into A, B, C and D categories. Then, place the B, C and D list aside. Take the A list and total the amount of money spent last year with that group, and divide it by the number of clients in that category.
$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.
Years ago, I developed a marketing piece for a client whereby the sales people could get a mere 10 piece to mail out to prospects to initiate a meeting. One salesperson selected 10 prospects and did the mailing of the 10, and was able to generate six appointments. That’s a 60 percent appointment rate, yet she told me the marketing was ineffective. Why? According to her, “No one bought anything." But that’s not a failure on the part of the marketing piece. It has everything to do with her sales skills or her approach. Remember, it is marketing’s job to open the door, sales to close the deal—they work in tandem, not opposite one another.
Smart marketers look at their marketing through a series of analytics to determine its effectiveness. To spend $20, $50 or even $100 on an account that can generate $9,091 in annual profits is well worth it.
People often ask me how one get starts doing this for their clients. I've always said it begins with you! Design and develop a group of creative strategic marketing of your own. Do this for marketing to existing clients, prospects and even clients that you’ve had in the past and would like to resuscitate. Understand their emotional hot-buttons and develop your marketing around that pain point for higher than normal success rates.
PROMOTIONAL MARKETING: an industry that is so powerful, when it comes to marketing your company and your services, it too must be, powerful, memorable and measurable.
As always, continued good speaking - CQ