Show Me The Money

November 5th, 2012  |  Published in Marketing Secrets

Only read this article if you are serious about getting rich.

Imagine you are driving to an important meeting 5 minutes early.

Then all of a sudden the car starts to splutter. You coast to the side of the road as the car loses power.

Confused you call a mechanic to come and fix your car.

‘Do you know why the car lost power?’ The mechanic asks.

‘No idea’ you respond.

‘Good news sir’, he says. ‘You are just out of petrol – I can give you enough to get to a petrol pump’.

Now 10 minutes late for your big meeting you detour your journey at speed towards a petrol station when a police car pulls you over.

‘Do you know how fast you were going? The officer asks.

‘No idea’ you respond.

‘Well you were going 75 in a 50kph zone, that will be a $200 fine and 100 demerit points on your license, and I see you already have 200 demerit points so that will probably cost you your license too’.

Now you are 30 minutes late for the big meeting with a big fine and a big date in court.

You drive off slowly this time to fill the tank and the car starts to splutter again! As you call the mechanic again you know petrol cannot be the problem.

The mechanic arrives and immediately asks ‘Do you know why the car stopped this time?’

‘No idea’ you respond.

‘The car is overheating because you don’t have enough oil or water in the engine. Didn’t the indicators tell you the car was getting hot?’ He enquires as if you are stupid.

‘What indicators?’ you respond.

All Your Problems Come Down To ONE Thing

You are not stupid it is just that your car does NOT have any indicators.

No speedometer, no temperature gauge, no fuel gauge. No feedback of the key performance indicators of your car.

No indicators means no warning signals as you run out of petrol. No indicators means no warning that the car was over heating.  No indicators means you have no idea of you speed and so you drive too fast.

You have now missed your big meeting and a potentially huge sale but that is just the start of your problems.

You decide to sell this car with no indicators. But all prospective buyers want to know is ‘How many kilometers does the car have on the clock?’

 ‘No idea’ you respond.

Vital Feedback

Now let’s imagine you install a dashboard that showed your speed, petrol levels, engine temperature and mileage.

Instantly the car has become a safe asset and does not need to be sold.

Of course this is just a story to exaggerate my point. No one would have a car with no indicators. That is just silly.

But remember your sales and marketing is also a vehicle that drives revenue and profits. This is also an area the MUST be measured and tracked meticulously.

…Because you cannot control what you cannot measure.

A business without sales and marketing indicators can run into trouble as quickly as a car without a dashboard of indicators.

If I were to ask you what are your current performance indicators were telling you this week and your answer is ‘No idea’ then we both know why you are having so many problems.

Magic Numbers

The only time I Like math is when I am counting money.

But in 8 years of working with clients I get to see that the rich ones know their numbers inside out.

I often get asked questions of me that cannot be answered intelligently without the numbers. For example: “My newspaper ad works pretty good. The media rep is urging me to increase from quarter page to half page. Should I?”

My questions have to do with what ‘pretty good’ really is.

  1. What is the cost per lead (CPL) from the ad? (Total cost divided by the number of lead your ad generated)

This is the money spent to get the prospect to raise their hand. So if you spend $100 a month and get 10 people call you or go to your website then your CPL is $10 from that media

2. What is the cost per sale (CPS) from the ad? (Total cost divided by the number of clients your marketing exercise        generated)

This is a truly critical number that tells you the cost of acquiring each new customer.

3.  What us the lifetime customer value (LCV) from the ad?

This allows you to measure the total value of each new client. This number also helps you get real about the cost of losing each client and helps you determine what you are will to invest to acquire and keep them.

2.  How do these values compare with other CPL, CPS and LCV from the other means you use to get customers?

That’s just he beginning, but if you can’t at least tell me those, I cannot tell you whether to increase, decrease of eliminate your yellow pages ad all together.

Once you know these numbers you then have a MA-CPS, a maximum allowable CPS and you work at getting as many new ways of bringing in customers as possible to perform at or below that number.

Hardly any business owner knows these numbers, although many think they do.

Just as a car with no indicators is trouble waiting to happen, so too is a business.

If you are buying ad media or investing in marketing without tracking the numbers on a dashboard then you aren’t managing your business.

You are guessing your business.

Richard

 

 

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