Is Yelp right for your business? That’s what I’m going to talk about in today’s small business marketing tip.
Hi there, internet fans. I got the idea of this video blog from an article I saw on Market Watch, from 2015, that said that business owners, specifically restaurants, independent restaurants, were spending $7,200 annually on advertising budget. However, their revenue from Yelp was only $4,600. And one of the caveats that came out in this article was the fact that they were only looking at the initial return on investment. What I mean by that is that if you’re in a business where consumers come back to you on a regular basis, then you really want to look at the lifetime value of that client. Let’s say for an example, this client is spending $500 and he’s getting three new clients every single month on average from Yelp. If each new client does the new client special, let’s just say it’s a hundred dollars for easy math. That means that $500-investment is generating revenue of $300 every single month. That is a net loss of $200, which does not sound like a good idea. That’s why it’s important to know what the lifetime value of every single new client is.
We know that some clients are going to last for maybe one visit, or two visits. Other clients are going to last for years and years. If you collectively add up all that information, divide it by the number of clients that you have, you’re going to get an average spent per client. That will let you know what your lifetime value of a client is. And let’s just say, as an example, it’s $1,500. That means that $500-investment on Yelp that’s generating three new clients, at $1,500 lifetime, that’s $4,500. I don’t know about you. Are you willing to spend $500 for $4,500? My answer is, yes. Now that doesn’t mean we can’t look for more efficient ways. I would love to break even every single month. If I’m going to spend $500 on Yelp marketing I would love to see a thousand or $1,500 return on that investment every single month. But is it necessarily required? Well, in this scenario it’s not, because we’re actually clearing $4,000 every single month based on the lifetime value of that client.
Here’s the key takeaway from today’s video blog. I would like you to check your numbers. If you have an accountant they can pull this information up for you real quick. If not you’re going to have to do a little bit of digging on your own. But find out, what is the average lifetime value for that client? Now, you don’t have to just use this in Yelp, as an example, you can use it in your Facebook advertising, any SEO money that you’re paying. It’s really important to understand what the true lifetime value is for that ad. What’d you think about this video? Did I cover everything? Did I miss something? Make sure you leave your comments below.
Alright, everybody, take care.