I've asked hundreds of business owners and marketing these three vital questions and almost 2/3 didn't know the answers! Do you?
I just returned from a twelve-day, six-city speaking marathon sponsored by the Association for Manufacturing Technology. AMT owns and manages one of North America's largest exhibitions, the International Manufacturing Technology Show.
Along with nine other presenters and support staff, we bounced from Chicago to Los Angeles to Detroit to Columbus, OH to Providence, RI and, finally, Charlotte, NC. Much like circus performers, our little band of merry misfits worked and played together pretty much the entire time. And, surprisingly, most of us were still talking to each other at the end.
I spoke about marketing strategies. (Duh.)
At the beginning of each presentation, I polled my audiences with five questions. The first two related to their experiences with the 2008 IMTS and were easy to answer. Questions 3 – 5 were pure day-to-day marketing focused and, frankly, not so easy to answer. In fact, in all five cities, roughly 2/3 of all attendees did NOT know the answers to these questions.
But, IMNSHO, every business must know the answers to these three questions (and I'm talking all the way from the too-big-to-fail behemoths down to the push-cart-on-the-corner solo-preneur). Let's see if you do.
1. How much does your average customer spend with you each year?
2. How many new prospects does your company identify on average every week?
3. What is your closing rate?
Why do I feel these are so important?
If you don't know the answer to these questions, how are you supposed to project corporate revenues for your next fiscal new year? For example, let's say your projection is $10 million. If your average customer spends roughly $25,000 per year, I'll know we need to find 400 customers.
Now let's say you have 360 current customers, of which you expect 80% will continue to purchase from you next year. That means 288 customers will stay with you, spending $25,000 each for a total of $7.2 million.
In order for me to help you generate $10 million, we need to uncover 112 new customers to fill in the additional $2.8 million needed. Follow me so far?
Now let's add to the analysis the fact that your company currently averages five new prospects each week and you average a 10% closing rate. At that current pace, you will generate roughly 260 new prospects and close 26 new customers. If something doesn't change, you will fall 86 customers and $2.15 million SHORT of your goal.
Knowing that, we can then create a marketing strategy that does one or more of these three things:
1. Generate 860 new prospects (approximately 17 more prospects
each week), thus closing 86 new customers and covering the $2.15
2. And/Or increase the closing rate.
3. And/Or increase the annual $25,000 average through either bigger
or more frequent sales.
Makes sense, right? It's not rocket science.
But what if you DON'T know the answers to those questions? Well, then it's actually harder than rocket science. You can't accurately (or at least as accurately as possible) project future numbers, nor can you create a marketing strategy that really fits. Do you need 86 new customers or 860? Different objectives can require very different strategies.
Do you know the answers to those three seemingly simple questions? If you do, then pat yourself on the back! You are in the minority. If you don't, I'd recommend you go find the answers.