07. Why a Marketing Budget is Useless

07. Why a Marketing Budget is Useless

Do you know what the average lifetime value of your client is? It sounds a bit strange as each client will spend a different amount depending on their needs but there will be an average you can work out.  

Consider this: Every client who comes through the door comes with some kind of cost to you attached. Whether it is a cost from a sign in the window, or cost from an advertisement on the radio, or cost from a referral strategy. 

There really is no such thing as getting a customer for free. 

But also consider this: Most people in the industry will talk about their 'marketing budget' and set aside a specific amount of money each year to 'buy' customers, like they were a major corporate with a marketing division, which is of no use to you.

When in fact it makes more sense to ask this question:

What is the lifetime value of my client? 

And then use that answer to decide how much money you are prepared to spend to get them into that door. Once you decide that, you then have a benchmark to work with to reduce that price until the quality of leads dips below the lower cost of getting one.

Take a client who is a regular one and has been with you for a number of years. How much do they spend in a year? 

Now take that number and multiply it by 11 - the average time, in years, this client will stay with you according to the statistics.  

Say the client spends £500 per year x 11 = £5,500 over their lifetime. How much money would you invest to get that one client into the salon? 


It starts to make sense now doesn't it? 

You may not have a marketing budget (and it does my head in when I see salon awards for marketing applications ask "what is your marketing budget?" like you have a department that is allocated a set amount of money and not allowed to spend beyond that). 

Even at a rough guess you can estimate your lifetime customer value by dividing your annual turnover by the number of clients in the business. That will give you a fair idea of what a client is worth to you over a 12 month period. 

Once you have that knowledge - and that's a simple ten minute job - you now have the power to say, “I'm prepared to spend £1.20 per person on a bulky mail campaign going out to highly qualified prospects, but not £575 on a quarter page advert in a glossy magazine that goes out to numerous people who may not be the right fit for my business.”  

The more you spend is not the answer to the more you get, sure you can get better quality leads sometimes by spending more money, but the idea is to get the cost of good quality clients down to a level that is giving you the best return on investment. 

And then the next idea is to make that happen over, and over, and over again so you have an unlimited stream of the right clients coming through the door. 

But that’s still to come. 

First we need to talk about why you are most certainly not charging enough.



Next article...

P.S. So last time I had left Madam sitting at the basin with colour still developing in her hair and there is no water coming out of the tap. 

In fact there is now just a horrendous noise like a scalded cat playing the bagpipes coming out of the walls.

You guessed it; the workmen had cut us off. 

Gone through a pipe, or hit the wrong button, or whatever excuse they have for leaving you high and dry without telling you.

So it’s panic stations and I have words with the workmen (‘can’t you see we are a salon and we need water?’), and thinking ‘how am I going to deal with this?’ 

Madam starts kicking off at the basin, screeching about her hair. 

Back in the salon I reassure her that she will get water from the shop next door and everything will be fine…

P.P.S.  If you can’t wait for the next article and want to know more, get your FREE copy of my book Grow Your Salon FAST here. Just enter the code GSGVIP when prompted. You will have to invest in post and packaging so I know you are committed to reading it. But don’t worry, your money is safe with my 100% Money-Back Guarantee. Click here to find out more.