Have you calculated your revenue per job lately?
Is your marketing budget paying off as much as it should in more profitable higher ticket moves? Or do you find yourself mired down in the busy work associated with managing many smaller jobs with low average revenue? It is critically important to track revenue per job by marketing channel because some channels result in numerous small jobs and others yield larger sized jobs. You might be focusing too many of your resources in the wrong places.
Put it in perspective
If you could choose, would you rather schedule 10 moving jobs with 10 different customers, each worth $600 or less, or would you rather have five moving jobs with five customers each worth $1,200 or more? That’s a no-brainer based on administrative cost, time and overall hassle savings alone. So why don’t more moving companies focus on landing fewer, bigger and more profitable jobs? It’s not because they wouldn’t welcome them. More often than not, it’s because many companies focus their marketing efforts - and dollars - on less-than-optimal revenue channels.
Make sure your marketing budget makes sense
We recently talked to a mover who wasn’t aware of his cost per job. We helped him work through the math and it turned out he’s been paying $600 per job on his purchased Internet leads. These are mostly local household goods moves that average about $600 in revenue each, so he was actually losing money on each job he got from those leads. We, of course, recommended that he shop around for better Internet lead sources so that he can reduce his acquisition costs.
On the other end of the spectrum, we have another client that almost always converts 1% of their direct mail into paid moving jobs at a cost of $80 per acquisition. These are also local household goods moves and their revenue per job is about $1,200, so clearly their direct mail campaign is a great success for them.
The only way to know for sure which channels will work best for you is to test and measure them.
Focus your resources on the right target channels
The less focused your marketing efforts are, the more time, energy and ultimately budget you’re going to waste trying to connect with the most profitable prospective customers. For example, Internet leads are very popular in the moving industry, even though they often result in smaller sized local moving jobs averaging $600 or less. On the other hand, other more traditional marketing channels, like direct mail, are proven to result in bigger more profitable household goods moves, averaging $1,200 or more per job. Somehow this dramatic difference is lost on many a moving company.
Assess your current marketing programs
What does your company’s marketing mix look like today? Most successful moving companies utilize several marketing acquisition campaigns across multiple channels at any given time. Some of the more common are online pay-per-click, Internet search engine optimization, purchased Internet leads, direct mail campaigns, and even targeted radio spots. Efficient, successful marketing efforts depend on knowing and understanding what each customer is costing you in each channel.
Calculate your revenue per job based on marketing channel
You can determine your acquisition cost per customer for your current marketing programs by dividing your acquisition expenses by your total number of new customers. For example, if you are spending $500 per month on pay-per-click (PPC) advertising and acquire five jobs as a result, your cost per job is $100.
Is the money you’re spending to find your customers now justified based on your revenue per job? You might find that a different marketing channel – like direct mail or even classified ads – makes a lot more sense in terms of targeting your audience. As mentioned earlier, even if you are utilizing the right channel for your moving business, you might be paying too much for the wrong kind of leads. Success depends on keeping close track of how your leads are performing compared to how much they cost.
The stories below outline two examples of local household goods moves – one small and one medium – to show the importance of measuring revenue and cost per job by channel on an ongoing basis. It is critical to understand these margins so you know exactly what you can afford to spend to get these new customers. This cannot be overstated.
Let’s take the case of small local jobs such as a four-hour minimum move. If the revenue from these jobs is about $600 and your variable costs are $400 (for labor, fuel, consumable supplies, sales commissions, etc), then your allowable margin from these jobs is $200. That means that you have to spend less than $200 to get these jobs in the first place if you want to have any money left over to pay your overhead and still keep any profit.
If you purchase Internet leads at $7 each, then you have to convert more than one out of 28 of them into scheduled moves just to break even. Likewise, if you mail postcards at $.80 each you have to convert one job per 250 postcards ($200 / $.80 = 250).
To take it a step further, if you are paying $8 per click on an Internet PPC campaign, then you need to convert one out of 25 clicks into a paid move ($200 / $8.00 = 25). Keep in mind that the costs of pay-per-click ads on the major search engines have risen sharply and dramatically. It’s nearly impossible to convert one out of 25 clicks so you are wasting your money if you are currently paying that much.
Assuming you’ve identified particular marketing channels that result in larger moves and that your average revenue for local moves is $1,200 (and your variable cost is $800) then your allowable margin is $400. This leaves you with a much larger allowance for your marketing budget.
As you can see from these examples, the difference in allowable margin per channel can be dramatic. To maximize your profit, you should focus more on the marketing channels that yield the greatest number of large jobs at the lowest cost, as opposed to channels that yield lots of small jobs.
Also, it is very easy to lose money if you’re not careful with your spending on Internet PPC ads. There are cost effective Internet advertising options available like Internet classified advertising sites and search engine optimization, but before you spend money on these initiatives be sure you can measure cost and revenue per job. Whatever marketing mix you decide on going forward, just remember that ongoing channel testing and profit analysis is essential.
Find out how to make more profit with fewer moves
For more information about how to calculate your revenue per moving job by marketing channel, and find more profitable prospects, contact Brian Long, President, Moving Leads by First Movers Advantage at (303) 443-0767. You can also get a free sample of our mailing list by clicking the button below and completing the Free Moving Leads form.