When deciding on any kind of marketing effort, one thing you need to to is consider how you measure the success of the that campaign. It might be a Google Adwords campaign, a Facebook campaign, or even a booth at a local expo. But when you are spending money to make money, it is important to make sure you stand a chance at making money.
First, you will need to look at what success means for you?
For me, I have a couple of different levels of success. I consider someone signing up for my newsletter a success. Someone purchasing a class or portrait session is a bigger success. Each has a different dollar value and by assigning values to them I can see if my ad campaigns are working for me.
But to assign those values, I need to determine what they are!
Email Address Value
The Annual Value
One quick way to determine the value of an email address is to take the annual revenue and divide it by the number of people on your list. So if you have $50,000 in revenue and 500 email address then that gives each email address a $100 value. You may want to instead look at the annual profits or profits + your salary to see how much you actually make per email address. So if you keep 35%, or $17500 then that would give each email address a value of $35.
When new potential clients come from a client referral they may have a higher value because a peer recommendation has a better chance of converting into an actual sale. When a potential client comes from an adWords campaign, you may want to assign a lower value because they will likely have a lower conversion rate. So you may instead choose to play with the numbers, like lower the value of each email address to $25.
Since I offer different options for photography classes as well, that is another level of value I can assign. For example, if I have a photography class that cost $125 and someone signs up, well, I know they are worth $125. So that is an easy value to assign.
Value of Existing Clients
Clients you already have are going to have more long term value than potential clients. Therefore it is worth investing in making sure the continue to come to you for your services and they already know what to expect from you! Plus remember, those customers can make referrals which give you even greater revenue.
So working out this scenario further using some basic numbers (try this with your numbers and see what happens):
Average Sales Per Client: $500
Number of Years Client Retained: 3
Client Value (sales x years): $1500
Number referrals (1 per year): 2
Referral Value (referral x client value x : $3000
Client Lifetime Value (referral + client values): $4500
Year One: 100 clients x $500 = $50,000
Year Two: 200 clients x $500 = $100,000
Year Three: 400 clients x $500 = $200,000
So with only $500 in average annual revenue from clients with a 3 year relationship and two referrals from your client you are looking at a $4500 value. So if you start with 100 active clients that's a value of $350,000 over a three year period. Of course, that assumes everyone remains and everyone makes at least one referral a year. But it also shows how important it is to retain clients. But there is actually a time factor to consider as well because you don't have unlimited hours to do that work so realistically you may only be able to have 200 clients a year if you spend 10 hours per client and work a full time 2000 hours per year. So that does start to limit your potential at the $500/client mark but that will still put you at the potential for $250,000 in revenu over a three year period. Be careful about your expenditures and that can make a difference in your paychecks.
Now, boost your average sales per client per year and things get really exciting.
So, take some time to consider what existing and potential clients might be worth to you. That will help you determine the success of your campaigns (more about that to come).