The Second Most Important Number To Track

The Second Most Important Number To Track
by Matthew Gillogly
Yesterday we discussed the all important statistic of 'LeadSource Income'. At the very end of that email, I promised you, a discussion on 'Lifetime Value Of A Customer'. Let's get started.

I have a confession to make.

There is a problem with just looking at LeadSource Income. And it has nothing to do with the concept or practice of reviewing LeadSource Income on a weekly basis. This is a necessary and critical function.

Too many business owners will make a judgement on a marketing campaign in the first 30 days. They figure if they don't make money in the first 30 days, then the ad wasn't successful.

I'm not going to suggest that you keep spending money for a 'minimum of 90 days' to determine if an ad works, or for your prospect to see your message. That's the job of the sales rep to tell you that garbage.

No, I'd rather help you understand the right way to evaluate your efforts.

It has to do with one simple word. A word many of us don't like but need to learn to practice more often. The word?

Patience.

When you invest in your marketing, you have to be willing to let your leads be nurtured and given time to convert into buyers.

It's why just focusing on LeadSource Income only gives you part of the picture. The other part of the picture is a simple statistic called...

LIfetime Value Of A Customer

Simply put, lifetime value of the customer translates into 'the amount of money an average customer will spend with you in a specific amount of time."

Every business has a lifetime value of a customer. Some are longer and more profitable than others. When we were in the real estate coaching and training business, we knew the lifetime value was $13,450 and that the average time, was 18 months. Of which 90% came in the first 9 months. (We could spend a lot of money to acquire a customer.)

In the golf school business, $5,500 over a 3 month period. After that time frame, the value was almost zero.

This number is important in two specific ways.

First, it tells you how much you can spend to acquire a customer.

Second, it tells you how long you'll need to earn your investment back from that customer acquisition.

The Case Of The Burnt Out
Mortgage Broker

A few days ago, I had lunch with a fellow business owner. A mortgage broker. He just had his best year, but we feeling a bit burnt out.

During our lunch, I asked him a simple question. "John, how much is a customer worth to you?"

"Well, a new loan makes me $2,000. But that's not where I make my money. I make my money because Realtors send me clients who need mortgages."

"Okay, how much did you make off your top 5 Realtors?"

"Well, I made an average of $8,000 a year. My top two accounted for 45% of my business."

Now we are onto something. We have something to work with in solving his business issue.

"John, how long does it take you, from the time you sign up a Realtor to the time they give you a deal?"

"15 days."

"Last question, how long does it take you to make $8,000 from your average Realtor?"

"Oh, I'd say, about 6 months."

That John knew these numbers is a minor miracle. Most don't have a clue, but he's better than most business owners.

"John, how much would you spend to make $8,000 in six months time?"

I could see him thinking about this question. A question no one had asked him or he'd even considered in 12 plus years as a mortgage broker.

"Matt, I guess, I'd pay $4,000 to get a new customer."

Bingo.

John just hit a huge breakthrough. He began to look at his business in a completely different light. No longer did he look at his marketing as an expense, but as an investment. He started thinking " Hey, how many new Realtors can I get for $1,000 a piece into my program."

Guess what happened. I ran into his wife Tammy the other day in the office suite. John just had a record month... in the first week!!

He understands the lifetime value of his customers. Therefore, he takes the time to invest in them and help them grow their business. In turn his business grows.

Imagine that!

John invests in his marketing, tracks his LeadSources and finally he nurtures the lead to bring him more business. Understanding that in 15 days time, he should have his first deal and within 6 months the investment paying off nicely.

From here on out, track LeadSource Income AND The Lifetime Value Of A Customer.

In a year from now (or shorter) you'll have data your competition doesn't possess and a healthy business.

Have a blessed day,


Matthew Gillogly
Partner - Chief Marketing Officer
Capstone Strategic Partners