To manage your agency, for it to survive — even thrive in these difficult economic times — you are going to have to learn to market effectively. And the evaluation of what is effective is based on facts and figures. Here are a few important questions to consider:
- How much does it cost you to attract quality clients?
- What is the lifetime value of each type client?
- What is your return on investment for each marketing program you implement?
These are pivotal questions and you should know the answers. For example, have you considered the crucial relationship between a client’s lifetime value and the money you spend to attract him? How’s that? Well, let’s say you sell auto insurance, your average client stays with your agency five years and the commission earned is $1,200. How much would it be worth to attract an additional $1,200 of income to your agency? Now that is a fact-based analysis that will help you run your marketing campaigns like a pro.
What should you spend on a cross-sell campaign, such as a client newsletter, to get a second or third policy in the same household and increase client longevity? How much should you allot for a referral program to get clients and others to refer their friends and family? Those questions cannot be answered without knowing key statistics.
What is making your phone ring?
Every prospect, not just new clients, should be asked: How did you hear about us? But don’t stop there. Your evaluation should go beyond knowing how many prospects came from each source, and include: How many of those bought and what was the dollar value of the sale? Why? Not all prospects are of equal value and you make money when a prospect buys, not when the phone rings.
To make a sound financial decision, you must calculate the return on investment of each individual marketing campaign. For example, say you bought a modest display ad in a small local paper for $500. It generated seven inbound calls and one became a client. Should you continue the ad? That depends if it produced a profit for your business. To know if it did, you have to track the dollar value of the initial sale and also know your lifetime value of a client.
That sounds so elementary but I seldom find agents who carefully track lead sources, conversion-to-client rates, value of initial sale, lifetime value, referrals from the client and dollar value of referrals. It may seem tedious to track all those factors but these are the fundamentals of a return-on-investment analysis.
This type of detailed analysis runs counter to the lessons taught in college business courses, which advise you to set your advertising budget as a percentage of gross income. Well, if you knew that an ad would return 3x in new commissions and 17x in lifetime value, wouldn’t it be a good investment? The bottom line is, you have to know before you can go, hence tracking key figures about your client-acquisition funnel.
By the way, a client newsletter is the best, automated method for following up with nonbuyers to turn them into clients down the road. MoreClientsEasier.com has information on doing this.
Diversity leads to stability