Q. Hi Adrian, I’ve got a major problem with one of my coaching clients. We worked together for several weeks and developed a new lead generation program for their business. The new campaign is generating a ton of leads, but resulting in just a few sales. I’m afraid my client is beginning to look at this campaign as a failure. Any advice?  

 -Rick Imus

Hi Rick,  The secret here is to know the difference between “response rate” and “return on investment.” As I work with business coaches all over the world, I continuously emphasize the fact that little changes can produce big results overall.

This chart is an excellent example of this

This chart focuses on 5 simple areas of business that business coaches can easily impact quickly and inexpensively.

The 5 areas are leads, conversions, increased transactions, pricing, and profit

Note that a meager 10% increase in just those 5 areas can propel a business making just $62,500 in annual profit to more than 6 figures (almost double). But then look at the last column where we assume a 50% increase in these same 5 areas. That business earning $62,500 skyrockets to almost half a million dollars… IN PROFIT! Gang, that type of increase is nothing short of TRANSFORMATIONAL for any small business.

Now, you’re probably thinking that a 50% increase in 5 areas is next to impossible to achieve. I can tell you from working with more than 500 coaches in 24 countries that a 50% increase is mere child’s play! We have strategies we give clients that typically produce percentage increases in the THOUSANDS.

But here’s the point

To be sure business coaches achieve these small changes, it’s important that they know and understand the difference between their client’s response rate and their actual return on investment.

In other words, when your coaching client spends money on marketing, how many prospects does that marketing generate… and how much money do they put into their pocket because of that marketing. After all, it doesn’t do any good to generate a thousand prospects if none of them buy.

It’s also worthless if they spend a thousand dollars on marketing and sell just five $100 products that have a gross profit margin of $250. This means they’ve just lost $750. Not a very smart move obviously, and yet I speak with business coaches every day whose clients are doing exactly that.

Let me tell you about a real-life example involving a real estate agent, and how an “uneducated” agent can lose a lot of money by not knowing the difference between response rate and ROI. I don’t want you to fall into this same costly trap. Not long ago an agent called us and said he was really disappointed with his marketing results. He told me that he placed home listing informational brochures into tube flyers on the signs outside his seller’s homes, and after 2 months had only gotten one client from them.

He thought that generating one client was a lousy response rate and that he probably wouldn’t continue this promotion any longer. So we started talking. I asked him how many active listings he currently had. He said 4. I asked him how much he spent to keep those info tubes filled with his “property flyers.” He said about $40 on each listing per month.

I asked him how many total calls he received during those two months. He said he had gotten over 110 calls, but most of them were lousy leads and basically annoying interruptions.

I asked him how much in commission he made from that one sale he completed. He said his co-broker commission was about $9,600 on the buyer, but after deducting out expenses and splits, his gross profit was about $5,000. “OK,” I said, “let’s do some simple math. You spent about $160 a month on 4 listings, which totals $320 a month in marketing expenses for those 2 months.

You received 110 calls, which means you spent $2.91 for each lead you received ($320 / 110 = $2.91). Of those 110 calls, you actually closed 1 of them into a client – netting you a total of $5,000 in gross profit.” “Yeah,” he said, “but I only got ONE sale from all those leads.”

So I asked him this… “if you went down to your local bank and handed them $320, and 2 months later they handed you a check for $5,000, do you think that would be a good deal for you?” He said it would be a windfall – an unbelievable return on his money. I said, “then why do you think getting $5,000 for spending $320 on your marketing is such a bad deal?”

He said he expected more. So we talked about what he could start doing to make some slight tweaks and minor adjustments that would motivate more prospects to call and the additional steps he could take to convert those additional calls into more clients.

For example, remember those 5 areas I referenced earlier? In the area of conversions, a drip campaign is probably the single most powerful strategy any business can ever deploy. Unfortunately, the vast majority of businesses today completely fail to follow up with their prospects.

This agent was generating 110 prospects every 2 months – with ZERO follow up. Are you kidding me!!! Do you think people would stop their cars to get out and retrieve a flyer from a yard sign if they weren’t seriously interested in purchasing a home??? These are QUALIFIED leads, and they should be nurtured over a period of months. When this agent implemented a drip campaign we helped him create, his sales increased from one every two months to 6 per month.

By the way, that was a 1200% increase in sales. That’s why I said a 50% increase is child’s play when you have the right strategies and your client implements them.

The point I want to make here is simple. Most business owners look at “response rate” and NOT “return on investment.” I’ve seen them actually stop working on promotions that were working and shift over to promotions that were complete duds. Many of them just don’t know the difference.

This is the single biggest reason why you should be measuring the effectiveness of your marketing so you’ll know the difference between a windfall profit and a hopeless loss.