If you don’t have a lead generation system, your business is in danger. Growing a business is simple when you understand the five lead generation triggers that impact growth and profitability.
The five trigger measurements are:
- Lead Generation: How many leads are we getting?
- Lead Conversion: The number of leads that convert to customers.
- Number of Transactions: The number of times a customer buys from you.
- Average Dollar Value: This is average sale price.
- Profit Margin: This is the profit I make on each sale.
So we are on the same page let me define marketing. Marketing is simply moving the buyer through the buyers? journey to achieve specific sales and marketing goals. In our five step process, when followed, you’re going to achieve your business goals and reduce the stress associated with growing a business. Going forward I am going to talk about the five triggers as a process I call the five-step process.
The five-step measurement formula is a way of doing business.
The five-part formula is so effective because it touches on each and every area of your business. It will improve, increase, generate and sharpen and strengthen everything that you and your employees do.
Once you complete a step, you’ll never go back to your old way of doing things again. This is a program for positive change and powerful results. The change is long lasting and the results are far reaching.
Choosing to begin the five-step process will have an impact on every area of your business:
Let’s get used to working with the basic formula that the five-step process is based on. You’ll want to post this formula somewhere visible, where you can see it on a regular basis.
- # of Leads X % Conversion Rate = # of Customers
- # of customers X # of Transactions X Average Dollar Sale = Revenue
- Revenue X % Margin = $ Profit
As you can see, each of the shaded lines is a factor that influences the bottom line – your profit. Each of the shaded lines is a step in the five-step process. You will work on each line sequentially, and the impact on your profit will build over time.
A nominal 10% increase in each of the five factors would look like this:
If you don’t know, take a guess. The point here is to understand how little increases will have big impacts on your bottom line profits. We’ll show you how to start tracking your results at the beginning of each step in the program.
Step One / Lead Generation:
How can you get more people to walk through your door, pick up the phone, and/or visit your website?
Your leads are your prospects or potential customers. They are people who have taken action in response to your ad or promotion, and have shown interest in your product or service, but have not become a customer because they haven’t purchased yet.
Lead generation is important because you can’t increase the number of customers you have. This is because customers are the by-product of two things:
# LEADS X % CONVERSION RATE = # of Customers
This means that you have to generate more leads and get more of those leads to make purchases in order to increase your customer base. Note; this is a very important step because your ‘cost of client acquisition’ (price you pay to acquire a new client) is the most expensive function of your business. Yours, ours and every business on the planet btw…
So lead generation is about finding ways to reach the people who need or want what you have to offer and getting them to act – to pick up the phone, visit your website or walk into your business. This is what the majority of marketing strategies are trying to do.
Step Two / Conversion Rate:
How can you get the people who walk through your door, pick up the phone, and visit your website to BUY something?
Conversions are the second factor in the customer equation. A conversion rate is simply our leads divided by our number of transactions in a specific time period.
# TRANSACTIONS / # LEADS = % Conversion Rate
This is a key focus of your business and your staff’s time. After all, why spend time and money attracting tons of qualified leads if you can’t make them buy when they’re in the store? We call this “confusing being busy… with being successful!” Don’t let it happen to you.
Several aspects of your organization impact your conversion rate:
- Your business image and the first impression customers have of you/your business
- The strength and effectiveness of your sales team
- Your sales process and staff training and development programs
- The strength of your sales scripts (Do you want fries with that?)
- The level of purchase risk involved in your product or service
Step Three / Transactions:
How can you get your customers to buy from you MORE than ONCE?
The process of attracting and converting a customer is one that costs you money. Customers cost you money. They’re an investment that you need to make the most of to stretch your lead generation dollars.
You can reduce the cost of your customer by increasing the number of times that they purchase from you. This increases the total number of transactions in your business and the amount of money that flows in.
So instead of continuously chasing down leads and converting them to customers, increasing transactions is about keeping our existing customers loyal and coming back to spend money.
Step Four / Average Sale:
How can you get your customers to buy MORE from you each time they buy?
Your total revenue is the product of how many customers you have, how many times they purchase from you, and how much they spend.
# CUSTOMERS X # TRANSACTIONS X $ AVERAGE SALE = $ Revenue
Increasing the average amount of money customers spend with you is the final way you can increase the amount of money that comes into your business. It’s amazing how small increases in this value can have big impacts on your revenue. If I were to come into your business tomorrow and you IMMEDIATELY needed to increase profits – this is the first place I would look and the easiest area to make a large improvement in your profits.
You’ll have to show your customer that they needed or want more than what they purchased. The amount that you are able to increase will depend on the type of business you are in – it’s easier to sell gel pens than an additional dishwasher – but generally every business can find opportunities to increase this figure. There are many ways to accomplish this.
Step Five / Margins:
How can you make more profit off each product and service you sell?
The last opportunity you have to influence your profit is your profit margin. Your total revenue times your margin as a percentage equals your total profit.
$ REVENUE X % PROFIT MARGIN = $ Profit
Essentially, your goal here is to make your profit margin as high as possible. As the final factor in the profit calculation, increasing your margin is a vital step towards maximizing your profits.
If your margins are too low, you’ll never make any money – regardless of how many customers you have, how often they buy from you, or how much they spend. Your revenue will perpetually go back into your business and be spent on costs.
There are three ways to maximize your margins:
- Increase prices
- Cut operating and product/service costs (operating costs include rent, leases, salaries, commissions, and office supplies)
- Increase gross profit margins (gross profit is revenues minus labor, materials and overhead related to the product/service)
Alarmingly, many business owners do not genuinely know their weekly/monthly/annual profit – you need to go into the business of generating a profit (this will be a paradigm shift for many – it is not about greed, it is about looking after those you care about. The more money you make, the more you can provide for your family, charity, your church etc…) and work towards increasing that profit each and every day, week, month and year.
Now that you have a good grasp on how the five-step formula works, and an idea of the marketing strategies you’ll learn to work with, take a few moments and set yourself up for success.
The best way to get started is to start paying attention to your current numbers and tracking systems.
Now that you have an idea of what factors and figures you’ll be working to increase, start paying attention to what those numbers look like now. If you have tracking systems in place, run some reports and get an understanding of your current situation. Think about these questions:
- where do your customers come from?
- what marketing campaigns work the best?
- what lead generation strategies work the best?
- how many of your customers buy from you?
- how often do they buy from you?
- how much do they buy from you?
- what do your existing profit margins look like?
- what percentage of your items are high margin, and which are low?
Now that you have an idea of where your business is going, let’s start mapping out how you’re going to get there.