COLUMN #1: Congratulations! You Just Made Facebook $14.34
Business is all about numbers. I think we all agree on that. Customer counts. Daily sales. Cost of goods sold. Net profits. The list goes on and on. In my 10+ years in business its surprised me how few business owners actually know THEIR numbers.
Don’t get me wrong I’m just as guilty as the next guy, I don’t know ALL my numbers forwards and backwards like I should. But, I know enough of the numbers that matter every month to get an idea of how things will end. So I’m not in total darkness. The numbers that
I track at my UPS stores are average customer sale, customer count and same store sales. Other companies keep tabs on similar numbers to. So you know numbers are important to a business, especially customer numbers. Let me tell you why this is so important.
Facebook recently announced they earn $3.82 per active user worldwide. All 1.71 billion of them. The number is up from $2.76 in 2015. In the US and Canada that number more than quadruples to $14.34 per user. That’s a lot of money being made from a “free” social network isn’t it?
So why is Facebook so interested in revenue from its users? Why do they care about this number so much? Because there’s a lot of reasons why numbers like these are important to a business. Here’s what this is all about.
Every “suspect” customer that calls your business has a dollar value associated with them. So the goal of EVERY phone call should be to convert them into a lead for your business. If you know your average customer sale, then you can assign this value to every “suspect” that calls. Let me illustrate this for you.
Let’s say your average sale is $50. Then every “suspect” that calls is a $50 sale waiting to happen.
Granted, not everyone who calls will turn into a lead. BUT, if they took the time to call your business they have some level of interest. Wouldn’t you agree? So if every call is worth a 50-dollar bill, then wouldn’t it be a good idea to put a plan in place for handling phone calls? A standardized system maybe? One with measurable results! Whose only goal is to turn that “suspect” into a qualified lead.
What would that goal look like? Well, depending on your business it could be booking an appointment to come in. Or requesting a quote over the phone. It can even be signing up to receive your free reports and monthly newsletter. The goal of this plan is to turn “suspects” into leads. But why all the hubbub about the phone? Here’s why.
Because whether you realize it or not you paid for all those phone calls that come into your business every day. They are the results of flyers you passed out last month. The little league team you sponsor.
Or the yellow page ad you bought. And they ARE worth something. But if you don’t know your numbers you’ll never now. So maybe you should train people to answer the phone. But this is just the tip of the iceberg.
If you know your numbers, there’s a lot of other things you’ll be able to do. For example, if you know that your average sale is $50. And if you know your average customer buys twice a year. AND if you know they buy three years in a row then you can calculate their lifetime value.
In this example it would be $50 x 2 x 3 which equals $300. So the lifetime value of a customer for your business would be $300!
Now, how can you use this information? Great question, here’s how!
For one thing you know the maximum you can spend to attract a new customer. Like I said this is the AVERAGE customer, so some will spend more and some will spend less. So if this was my business and I knew this I would pick a number less than $300 as my limit. In this case I would choose a number like $150, this gives me a lot of wiggle room to do things. But that’s not all.
If you know what you can spend to attract a new customer, then you can analyze advertising proposals.
Like this. A billboard campaign is going to cost you $1000 a month for three months. Using your customer lifetime value you know it has to generate 20 new customers to pay for itself. Is this possible?
Maybe, that depends on your business. How good are you at converting “suspects” to leads and then into paying customers? But, at least you’ll have an idea of what you’re up against. And you’ll be able to make a better decision when a salesman is standing in front of you.
Finally, knowing your numbers will teach you the most important lesson in business. That NOT all leads and lead sources are created equal. Just like not all customers are worth the money they spend.
Let’s face it, some customers, clients and patients are a REAL pain in the ass. They buy little, expect perfection and always complain about your prices. If you could find out what lead source these customers came from you could remove it from your business. But how can knowing your numbers help with this? It’s easy, let me show you.
In our example we know that the lifetime value of a customer is $300. We also know that the average sale to a customer is $50. Knowing this we decide to only spend $150 to attract one new customer.
What this now allows us to do is outspend our competition so we attract the best customers possible. We can have more sophisticated marketing systems in place and not compete on price. If a customer does business with you because you’re the cheapest, they’ll leave you for a cheaper option.
Most of the time price customers are the ones who complain and make your life miserable.
If you provide information and educate your “suspects” before they turn into leads you can highlight all the value you provide. If this value is something your competitors can’t match, then you have a Unique Selling Proposition (USP). This will differentiate you from the competition.
The best part is you can do this without even mentioning your prices or fees. At this point when a lead is ready to buy they’ll understand what you provide. They’ll know you’re unmatched and the BEST and ONLY logical option for them.
I don’t need to tell you that Facebook is beyond smart in the numbers department. They know them backwards and forwards and know how much they can spend to attract a new user.
Take their example and apply it to your business. It’ll help you attract a better quality of customer and live a happier and easier business life. Remember, “Life is a series of missed opportunities, so go for yours.”™
Look for Victor’s column: Victor Urbina’s Minding Your Business every other Sunday.