Lifetime Value @ @ Burke’s Billing Builders.

When you’re selling advertising to small businesses, you know it can be either one of the most rewarding or frustrating experiences in your career. When you help a small business grow through your advertising creativity, you can absolutely change their lives. For me, it’s thrilling. On the other hand, when a business won’t take the leap when you know you can help them grow can be incredibly frustrating.

One of the objections you may run into is that the goods the client sells are priced low. For instance, maybe they sell sandwiches for an average of $5. When they see an ad schedule priced at $1,500 for the month, it’s hard for them to see how advertising with you will sell an additional 300 sandwiches…just to break even. Good question.

One of the equations they and you should examine is the lifetime value of a new client. When the business gets a new customer, how much does that customer spend with them over the course of a year or more? I was just with a woman who has 5 young daughters at home. We were talking about how she organizes her home with dinner, carpool, etc. She said they have pizza at least once a week, sometimes more. What are the odds that she goes to the same place for pizza most of the time? Pretty good I imagine. If a large pizza with one topping costs $15 on average, what’s her value to the pizza store? Once a week ordering makes her worth $780 a year to her local shop. Now, that’s a customer they want to attract.

Most businesses don’t include this examination in their decision making process although many of them know how much each customer is worth. The same equation occurs when they lose a customer. Some may act cavalier when they lose a customer (“Oh well, there are more fish in the sea…”) but if they know the lifetime value of each customer, the false bravado is easy to see through.

I did this evaluation during a visit with a national trash removal company in the Midwest. They were under attack from another major competitor and felt like they needed to sell themselves. However, they had never done any electronic advertising and were having a hard time justifying our TV schedule cost for a service that runs about $7 per week. Here’s what we did: We had them do some research to find out how long customers stayed with them once they signed on to their service. The average? Just over 7 years. Whoa! So, let’s do the math. $7 per week x 52 weeks is $364 per year, for seven years is $2,548 of lifetime value per client. So, each new customer they get is worth just over $2,500. It wasn’t very hard to justify a $5,000 per month ad schedule after that.

Bottom Line: If the product or service of the company you’re selling is small, walk them through the lifetime value of each customer. Some may have this figured out already, but some won’t. It’ll be eye opening for them and an easier sell for you.

Dave Burke is President of Burke Media Marketing, Inc, an advertising sales training consultancy. Dave works with radio, TV, and cable sales teams and their clients to help them dominate their markets. He can be reached at (603) 746-5588 or http://www.BurkeMediaMarketing.com