Money out, customers in
Are your marketing dollars doing their job?
If you're like many business owners, you get the feeling that 80 percent of your marketing dollars are just wasted, and you'd really like to know which 80 percent so you could either cut or redirect the funds. Unfortunately, most small- and medium-size businesses lack the tools necessary to adequately measure the effectiveness of their marketing programs so they continue doing what they've always done and hope for the best. Sound familiar?
The truth is it's impossible to get a handle on your flight school's marketing success without measuring a few critical variables and determining how the dollars spent in marketing affects those variables. Here are a few (relatively) simple things you can measure that can help you get a better handle on what's working and what's not:
- Cost per lead. The goal of most external marketing—things like advertising and trade shows—is to generate leads. In the flight school business, a meaningful lead is somebody who takes a tour of your facility. People who call periodically to chat or read your newsletter are not leads, they're prospects. Prospects are a dime a dozen. Leads cost money. How much money? That's what you need to measure.
Take a three-month period. Calculate all the money you've invested in advertising: free hot dog day, email marketing, website maintenance—the works. Total the number of visitors who came to your school for a tour or demo flight. Divide the dollars by the number of visitors and you've got your cost per lead. That's your baseline. Your next goal will be to increase the number of leads per dollar by refining your marketing program. - Cost per customer. How many of those leads became customers? And what's a customer? Let's say it's somebody who spends at least $1,000 with you over the next 90-day period. Dividing the total dollars invested by the number of defined customers will give you your cost per customer. If you're like most schools, this cost will be much higher than your cost per lead (at least at the beginning).
- Conversion rate. By now you know how many leads you've gotten, how many leads became customers, and how much money you've spent. It's a simple matter to divide the number of customers by the number of leads to get a decimal or fraction value that shows how effective your school is at turning leads into dollars. Simple enough? Maybe not. There can be several reasons why your conversion rate is low. Maybe your lead quality was bad. Maybe your idea to give away free airplane rides brought in a busload from out of town. Maybe your choice to advertise in the Pennysaver (lower rates) brought you bargain shoppers instead of business owners. Or maybe your team was not adequately trained to sell your services and build value. Did they ask for the sale: “Would you like to book your first lesson?” Perhaps your low conversion rate has more to do with your inside sales process than it does with lead quality. Whatever the case, this baseline conversion rate will give you starting point on which to base internal and external improvements.
- Customer lifetime value (CLV). How much is a customer worth to your business? If a student starts with your school and completes her professional pilot training, how many of the dollars that she spent will be gross profit to you? How many of her dollars will you show at your bottom line? This is her CLV. Why is this important? CLV gives you a sense of the long-term value of the customer—not just a snapshot of the cost to bring her in the door the first time. Basing a marketing budget based on CLVs rather than simple lead/customer formulas can make sense for companies looking to establish a high profile and gain market dominance. If your customer spends $70,000 at your school, how much of that is gross profit? How much are you willing to invest to bring in that customer?
- Return on investment for a specific campaign. Let's say you're going to make May your school's Learn to Fly Month. You've assembled a great social media campaign, sent special invitations for a VIP presentation to your prospect list, even arranged to have the local radio station do a remote broadcast from your school. You do Free Burger Day every Sunday in the month, and give discounted demonstration flights to those interested in taking the next step. May comes and goes; you had a lot of visitors, put your school on the map, and got a ton of positive feedback. Was it worth it?
You know you need to give it some time to incubate, so you count the number of new students you get over the next four months who registered during your May campaign. You calculate their CLV, then divide it by the total cost for the campaign, including the mustard for the hot dogs and engine reserves for the demos. That is your return on investment. Were your marketing efforts a success? If you based your answer to that question on cost per customer it may not look so grand, but applying CLV to your equation might paint a rosier picture.
The point of this is to emphasize the importance of measuring your results rather than basing decisions on seat-of-the-pants feelings about whether a marketing effort worked. Numbers will tell the story. Sure, it takes some effort to keep track of leads and customers, but even if your data-gathering system isn't perfect, it's better than nothing.
The more you measure, the more you'll see the insides of your marketing investments, making it easier to better assess what dollars can stay in the till or go into more effective efforts.
William Woodbury is a flight instructor and freelance writer in Southern California.
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