The (not so) Secret Key Metric That Can Help With Your Marketing Budget

The (not so) Secret Key Metric That Can Help With Your Marketing Budget

This concept is one of the not so secret secrets to knowing how much you can afford to spend on gaining new clients for your salon. And it is such an important metric that it is surprising many salon owners don’t use it in determining their marketing budget – in fact it is little known let alone widely used in salons, but today I’m here to reveal its importance to you and show you how it works.

Here’s what I’m talking about: the Lifetime Value of a Client. The LVC is the total income produced by an average client of your salon over their lifetime coming to you. And once you know that figure, you’re then in a strong position to decide on how much you will spend to get new clients.

As an example, let’s say that the first time your new client comes in she spends $145.00 ($65.00 haircut & $80.00 colour) She comes back in every 6 weeks for a haircut, and maintains her colour every second visit (12 weekly) and she buys a shampoo & conditioner every 3 months. In the course of a single year she is potentially worth $1150.00 to your salon. Now let’s say she stays a client for 4 years, she will have spent a minimum of $4600.00 with you. How much of that is profit, let’s assume its 40% then you stand to make $1840 profit off that one client over the four years.

The question is then, how much will you be willing to pay to get her as a client? You could actually spend up to $1840 and still break-even but I wouldn’t suggest that! Would you invest $50.00 to get $1840.00 back in 4 years? I bet you would, But really, you don’t even have to wait that long because on the first sale you make money, more than enough to cover the $50.00.

Let me ask you this, If I said to you – “give me $50 today and in four years I’ll give you $1840 back”, would you view it as a good investment or a risky expense? I’d like to think you would see it as a prudent investment and that is exactly how you should look at the investment into gaining a new client – an investment in the future income and profits that that client will bring.

The challenge today for many salon owners is old thinking, let’s call it the ‘in the good old day’s syndrome’ This is where we remember the days where it was easy to stick an ad in the paper or a leaflet in local letter boxes and we’d get a huge response and we had weekly sets and blowave to keep the profits rolling along… and we don’t see how the market has changed – we know it has but we haven’t adapted to it and still expect that large response – so much so that we now say marketing doesn’t work, but if you had a budget of $50 each to gain a new client, how much better do you think your marketing would be? In many cases you don’t even need to spend anywhere near that sort of amount.

Now let’s look at this scenario: You spend $1000 on a well thought out, professionally designed letterbox drop flier and you get 500 of them printed and you deliver them yourself around your salon neighborhood and you get 10 new clients from this. That would mean your cost to acquire a new client is $50 each.  Now assuming all being equal and they all stay for the average lifetime (4 years) the income from those 10 clients over their lifetime (Lifetime Value) would be $46,000 or profit wise $18,400, not a bad return for your $1000 investment.

So the lesson here is to calculate your Lifetime Value of your Clients and then work out just how much you would be willing to invest in their acquisition. And one more thing, think about the referrals that could come from your new client too, they are even more profitable as you haven’t needed to spend anything on gaining them.

Start calculating the lifetime value of your average client and then work on specific promotions to gain new ones, also work on strategies for increasing the average client bill too by selling them more products and services.

If you have any questions or need some salon building advice, message me here. I’d love to chat with you.


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