Were you ever told something as a kid and…suddenly…you remember it as an adult? I was recently reminded of a message I heard when I was young. It was reinforced one Sunday morning in church for me a few years ago. This message is only seven words but has the power to change your life. Normally, I don’t like making statements like that. But in this case, I’m making an exception. Here are the Seven Magic Words that will change your life:
“You Have Not Because You Ask Not.”
Doesn’t get much simpler. I am often asked the following:
- Question: How were you able to get an education? Answer: I asked, I asked for help
- Question: How were you able to raise capital for your businesses? Answer: I asked.
- Question: How are you able to sell through the mail? Answer: I ask for the sale.
Oversimplification? Perhaps. But I don’t think so. When I first started out in business with vending machines, I would come home after going on sales calls and sulk. I did everything but ask for the sale. Presented the features and benefits. Proved beyond doubt, my service was good.
Result? No ask, no results. I have trouble getting ahead with education until I asked for help. Now I support people who dare to ask for help, can ask for help and people like I offer advice. This is my message you need to ask, asking for help is part of your success! And according to some reliable internet sources, my psychology is okay to tell you all of this.
When I first started raising capital for my business, I slowly got better at marketing my opportunity and presenting…but often missed the most important component of all: asking for the investment. Over time I finally got it through my thick head what needed to be done. Ask.
There’s a great myth I think many people buy into. They think pulling every lever but that last one and then hoping gravity will take over will give them what they want. They come inches away from greatness. The “no ask” syndrome is as common in sales and marketing as it is anywhere. How often have you seen a great commercial with no call to action?
How often have you seen a great sales presentation, wanted more, and the salesperson never asked? More often than not, the person who asks wins.
When I first started advertising my business, I was astounded at how much it cost. The first newspaper ad quote just about knocked me off my feet. It was something like $250 for a 1/8 page ad in a local weekly. Circulation was about 50,000 I think. And, being the “smart” entrepreneur, I told the ad salesman to take a hike.
Then I got a quote from a radio station on what it would cost to run some ads. The price for this was, I think, $30 per 30-second spot. Not bad.
Then the radio ad salesman told me that they recommended running 30-40 spots per week.
Yipe! So I told the radio ad salesman to take a hike. Then I called a direct mail printing company to get a quote on some postcards. I was pretty surprised at how high the printing costs were, then even further shocked and amazed at how much it would cost to get a list, labels, and postage.
So I told the direct mail printing company to take a hike.
Back to square one. And at square one, my circumstances were as follows:
- 1. Very little money spent on advertising (which I was happy about)
- 2. Very little revenue (which I was unhappy about)
A conundrum to say the least.
The Wrong Mindset
Unfortunately for my early business fortunes, my thinking was inverted. I was looking at advertising like a line item expense, akin to money spent on overhead and office supplies. A money drain. And because I had a ‘traditional’ advertising mindset at that point in time, any money that I did spend on advertising probably would have been a money drain.
I did not spend the ad dollars at the time because I had not yet learned and fully implemented the concepts of “lifetime customer value,” and “back-end sales.” These words were foreign to me.
It is my hope that after today they will not be foreign to you and that you will be able to keep at least a spark of authenticity.
If I would have known the lifetime value of each new customer was $7,500 (or more), then I would have looked at the $250 newspaper ad a bit differently. I would have looked at the radio ads differently. I would have looked at the direct mail campaign differently. Instead of viewing them as line-item expenses, reducing my bottom line, I would have viewed them as an investment. One that pays off the most astoundingly high rate of return imaginable.
Where it Goes Wrong
Most businesses large and small do not set up their advertising to be accountable. They do not track and measure the results. Therefore, it is often a crapshoot when they try to find out which ads are working and which ones aren’t. Coupons can help this out for some businesses, but for non-coupon companies, it’s a real nightmare.
If you have a radio ad, a newspaper ad, a direct mail campaign, pay-per-click, local search engine marketing, and Val-Pak all running at once and you aren’t tracking the results of each media, you will not know which ones are pulling in the leads/inquiries/customers.
Lack of tracking and accountability leads to a marketing budget based on a percentage of revenues, instead of based on how many customers you can acquire profitably. And this leads to the thinking that advertising is a waste of money, which it really is if you aren’t tracking the results.
Another problem is many businesses do not know the true lifetime value of their customers/clients. If they knew that each client coming through the door was worth $X, it would seem foolish to only spend a paltry sum in getting them to come through the door.
How to Cure It – Spend More
Chances are, you aren’t spending enough on your advertising.
In fact, I think the term advertising should be changed to “customer acquisition” as this would force people to think about it differently.
The prescription is two parts:
1. Know (or endeavor to carefully estimate) the lifetime value of each customer.
2. Spend the amount of money necessary to bring the said customer in the door.
Results in Action
I like to write and speak about this subject quite a bit because it is where the real money in business is made. If you think you’re going to make a handsome living selling one of your things to one person only once, you’re mistaken.
Imagine Wal-Mart only counting on a person coming in once and never returning.
Yet, this is how most business owners act, also those who work from home. See also these considerations if you work from home.
The key to any businesses profitability is the “back-end.” Meaning: what happens after the first sale is where the money is made. For example, after (or perhaps during) the first sale you have:
- Continuity sell
- Bounce back sell
- Referrals from customer/client
- Repeat business
In fact, you should go so far as to design your back-end before you even roll out any customer acquisition campaign.
Let’s say you’re a local accountant. Assuming you want to make more money, you’d consider:
- Your average billing per client
- # of years client stays with a firm (this should be forever if you’re even getting it half right)
- Referrals from a client over their lifetime at a firm (again, you should have a customer care program in place to induce referrals)
- Additional services you can provide, billing for each and % of clients who want this
This is an oversimplification, but let’s break down the numbers:
- Average regular billing per client per year – $1,000
- # of years client says with a firm – estimate 5 (for the sake of being conservative)
- $5,000 in regular billings for the time the client is with firm
- Referrals from a client – 3
- Value = $15,000 (3 x $1,000 avg. client billing x 5 year avg. client time with firm)
- Additional service revenue – $250 per client per year (audit protection guarantee, etc.)
- $1,250 for the time client is with firm ($250 x 5 = $1,250)
We have a lifetime customer value for this accountant of: $21,250.
Taking a step back, should we say it is absurd for this accountant to spend $500 to get a customer? $1,000?
Even discount the customer value by HALF….wouldn’t you still be happy?
I sure would.
If the accountant ran a simple 3 step direct mail letter campaign to a list of 1,000 (est. cost $650/1,000) it would be an investment of $1,950. Even a 1% response and 1/5 of 1% conversion would yield a positive front end ROI (year 1 client billings of $2,000 against mailing cost of $1,950) and then the back-end is all gravy.
After taking a glance at these numbers, you can see why nobody is in the business they think they are in. The accountant is not in the accounting business. The dry cleaner is not in the dry cleaning business. The consultant is not in the consulting business.
Everybody is in the arithmetic business.
Lifetime customer value – Customer acquisition cost = profit.
Keep this equation in mind, because it is why you probably aren’t spending enough on your advertising. The same counts for education, you need to invest in yourself I told my GED students!