CEO at 60 Second Marketer
Jamie Turner is an internationally recognized author, speaker and the founder of 60SecondMarketer.com, a business blog read by hundreds of thousands of executives around the globe.
He is a regular guest on CNN where he provides insights on branding, marketing and business. He’s also been profiled in one of the world’s best-selling marketing textbooks.
Jamie currently runs the 60 Second Marketer as well as SIXTY which is a marketing advisory group specializing in helping clients get more bang for their marketing buck.
Tactic that has had the biggest impact on Jamie’s success
Understanding the details of concepts like “Customer Lifetime Value” and how to leverage those concepts to improve conversions
Result if you follow the steps in Jamie’s session
Full session with video, notes, audio and discussion inside EHQ Club. Learn more
Expert session snapshot
What you would do is kind of take a period of time and say, five years might not be a bad thing. It’s over the course of five years, how long do we keep our average customer.
And so you’ll go in and say, hey, we added them all up, all of our customers up within that five year period. We had 10,000 customers, and on average, we kept those customers 24 months, some of them we kept 18 months, some of them we kept three years, but on average, we kept them at 24 months.
So then you say, okay, cool, $100 a month, 24 months means my customer lifetime value is $2400. The real question then becomes, alright, if you know that when you get a customer in and you’re gonna make theoretically $2400 for them, on average, how much money will you spend in order to get that customer?
So that’s when you start getting into something called allowable cost per sale. The allowable cost per sale is roughly 10% of your customer lifetime value.
Now I’m saying roughly and this is a basic way of doing things, I’m given the sort of fundamentals of this, because there are a lot of people I wrote a book on social media with a professor at Emory University here in Atlanta. And I described this model that you and I are talking about Liam, and she said, do me a favor, that’s very fundamental model.
And I, you know, I teach this. I’m a PhD. It’s much more complex than that. But the bottom line is, let’s keep focusing on this sort of platform. And then you can get more and more sophisticated as you move on. But the key idea is that customer lifetime value we talked about in phase one, phase two is allowable cost per sale, how much will I spend in order to acquire a new customer?
A starting point for that is 10%. So think about this from a chief financial officers point of view. They go in and they say, hey, you go to the chief financial officer and you say, hey, guess what? If you give me $240, I can make $2400 for you. That’s a one to 10 return on investment.
Any CFO on the planet would say, yeah, I’ll give you 240 bucks, if you can generate $2400 based on that. Here’s a pile of money, you know, because we can do it. Now that makes it sound very simple. It’s actually more, it’s harder to do than you think.
Here’s why. And now we’re ready to move on to phase three, which is this. You have to figure out how many people are going to go to your website for that $240 before you convert a customer in order to make the $2400.
So in other words, we’ve said our customer lifetime value is 2400. We said we’ll spend 10% of that to get customers. So that gives us $240. Now let’s say we’re the lawncare company, and we’re say, well, let’s run Facebook ads in order to drive people to our website, and get them to buy our lawn care service.
So you run $240 worth of Facebook ads, let’s pretend for a second that it costs $1 per click when you run a Facebook ad. So I’m going to put you on the spot here Liam. I’m about to ask you math. If I have 240 bucks, and I say it’s $1 a click on my Facebook ad campaign. How many people am I going to drive to my website?
Yeah, well, let’s hope it’s 240.
You got it. Excellent. And I hate putting out a spot there. If it was me, Liam, I would have like flamed out and said, oh, my God, I don’t know, let me get a calculator. But you’re as smart as I thought you were.
So the bottom line is now we have 240 people on the website, right? Well, that’s only half the battle, because we’ve got to get at least one of those people to convert in order for that money to make sense.