The day was a little warmer and sunnier than March usually offered.  My basketball team had advanced to the Elite 8 over the weekend and I had just come off my best month in radio sales. 

I should have been pleased.  I should have been feeling good.

I was neither.

I was not pleased nor feeling good because of two accounts that had me flummoxed.  The first was a pet training school and the second was an electronics retailer.  There was no doubt that my radio station could benefit both of these prospects but I hadn't been able to close them.  Normally, I would just have popped into Dick's office to discuss the accounts but Dick and I had gone our separate ways.

While it seemed kind of silly, I was hesitant to speak to the sales manager at my new station.  Not that there was anything wrong with her, of course.  She was bright and energetic and she had been a top-notch seller before becoming the sales manager a number of years ago.  Most of the staff thought very highly of her and it wasn't that I didn't, it's just that . . . well, maybe it was me but we just didn't seem to click. 

"Well, it's not going to hurt anything to let her know what is going on," I said to myself.

So, upon my return to the station I went by Michelle's office.  She was on the phone but waved me in and pointed to one of the chairs facing her desk.  I sat.  While I waited I perused the walls.  Along one wall were colorful drawings of what appeared to be dragons.  There were green dragons and blue dragons and red dragons and orange dragons.   The paper was curled where it had been rolled and rubber-banded for the trip home from elementary school.  The dragons were all different sizes and shapes but they each had one thing in common. 

Each was being ridden by a little boy.  He was way up high on the necks of the dragons.  Always holding on with legs wrapped tightly and one hand gripping reins.  The other hand held a weapon.  The weapon of choice was sometimes a sword and sometimes a pistol.  He was even swinging a mace in one picture.  I noticed something else about the boy.  He was smiling.

Michelle got off the phone and said, "Hi, stranger."

"Hi," I replied.  "I was just enjoying your son's art work,” I said gesturing towards the wall.  Michelle twisted in her chair and looked over her shoulder.

"Ah, yes, Thomas the dragon rider."  Michelle smiled and said, "He's a little single-minded in his art work."

"I think it's interesting that he pictures himself on a dragon instead of trying to slay one," I remarked.

"Why do you suppose that is?" Michelle asked.  She had pulled her chair closer to the desk and clasped her hands in front of her.

"Oh, I don't know.  Maybe he doesn't think of the dragon as the enemy.  Maybe he's trying to harness the power of the dragon towards achieving his ultimate goal," I surmised. 

"What do you think his ultimate goal is?" Michelle was drawing me into Thomas' world with the deft skill of one who uses questions to advance a conversation.

"I can't really tell his ultimate goal from the drawings," I decided out loud.  "But, it could be that he is simply having a fun adventure."

"Could be," Michelle agreed.  "It's not easy to determine what an eight-year old is trying to communicate with his watercolors!"

We both laughed.

"What's on your mind?" Michelle asked, bringing the conversation around to the present.

"I've got two accounts that are giving me some trouble and I'm hoping you can help me figure out what to do or say to close them."

"I would love to do that, Tim.  Let's tackle the first one."

"The first one is a dog training school.  I've been meeting with the owner who uses the newspaper and a couple of magazines.  I've determined that he has the budget to use radio effectively and his customers fit our audience profile.  The problem is that he would like a free schedule to test radio and see if it works."

"Is there any guarantee that if we give him a free schedule that he would then buy advertising from us?" Michelle asked.

"No, not really," I replied.

"Well, this sounds like a guy who doesn't really want to buy but hasn't come out and said so.  You've got to flush him out to get a 'no' out of him or else he'll waste your time for weeks or months.  Here's how you do that.  Give him a call and tell him that we've agreed to his condition.  We'll give him a free advertising schedule but we have a condition of our own."

"Which is what?" I wondered.

"We get to write the copy.  Our copy will read that he is giving away one-hundred dollar bills this Saturday morning starting at 9 a.m.  Our agreement with him is that he has to give away a one-hundred dollar bill to every customer that comes in the door until noon."

I burst out laughing.  "That is hysterical.  He'll never agree to it because he knows it will work and he'll give out thousands of dollars. . . "

". . . and then, when he doesn't agree to it because it would work too well you'll point out to him that he already believes our radio station will work and he doesn't really need a test," Michelle said, finishing the point.

We both laughed as we imagined the owner stammering and stuttering after hearing our idea.  I was beginning to wonder why I hadn't spent more time with my new boss.

"What's the other one?" Michelle asked after catching her breath.

"The other one is an electronics store.  He is willing to spend $5,000 for a month of advertising.  But, he says that his advertising budget is 8% of sales.  So, if he spends $5,000 with us he is expecting to receive an additional $62,500 in revenue for the month.  I asked him what his current sales are and he said that he averages $100,000 per month.  So, I am thinking there is no way that we are going to increase his sales 62.5% in a single month!"

"You are right about that!" Michelle agreed.  "But, there is a way for us to talk about a return on investment from his media expenditure that makes sense within the context of his budget.  Here's how you do it."

Michelle took out a piece of paper while I admired a framed picture on her desk.  The picture showed a sailboat silhouetted by a gorgeous sunset and a caption that said, "Follow your dream."

"Since I assume you don't have the specific answers to the questions we need to ask the store owner, we'll just make some assumptions based on the information we have plus our knowledge of his industry.  First, how many customers contribute to the $100,000 in revenue that he does every month?"

"Well," I said as I did some math in my head "his average ticket is probably in the $2,500 range.  So, that means he sells forty customers per month."

"Great," Michelle was writing down the numbers.  "Now, we need to figure his closing ratio.  How many people do you think come into the store each month?"

"I've been there quite a bit so I have a pretty good idea that he gets about fifty people on Saturday and that's his busiest day.  He's closed on Sunday.  So, I would say that he is bringing in about one hundred people per week."

"Okay, let's just round that out to four hundred per month," Michelle said.  "That makes his closing ratio forty out of four hundred or ten percent."

"Right.  That's why I was figuring it was impossible for us to take his $5,000 and keep his expense ratio at 8% of revenue.  We would have to bring in waaaaaay too many people," I said dejectedly.

"But, you haven't seen the best part of the equation!" Michelle was really excited now.  "People who become customers continue to be customers for a long time.  Do you have any idea how long someone who is a customer of his store remains a customer of his store?"

"No, we've never talked about that."

"Well, the industry average for electronics stores is seven years.  If a customer typically spends $2,500 when he comes to the store is it reasonable to assume that he will spend that amount in four of the next seven years?"

"If he did that would mean the customer would spend $10,000 over his lifetime of being a customer."

"Yes," Michelle agreed.  "All of a sudden it's beginning to look like we can achieve his return on investment.  But, we're not done, yet.  Has he mentioned that his best form of advertising is 'word of mouth'?"

I rolled my eyes and answered, "Yes, doesn't everybody say that?"

"Well, it benefits us in this equation.  Let's assume that every customer is really worth 1 1/2 customers because of referrals.  That means instead of each customer having a lifetime value of $10,000 it's really $15,000.  Here is the equation we are going to present to him to prove that the $5,000 we are asking will produce the return on investment that he seeks."

With that, Michelle turned around the piece of paper and showed me this:



"Most sellers want to convince the prospect to change the % cost of their marketing or the total revenue increase the customer should expect from his advertising," Michelle explained.  "We are taking a different tact by showing the customer that he can get the $62,500 in additional revenue from a marketing expense of $5,000 as long as he doesn't expect all of it to happen during the month of the expenditure."

"This makes a lot of sense to me", I said rubbing my hand on my chin.  "Expecting to turn $5,000 into $62,500 in one month is unrealistic but asking us to bring in an additional forty-two qualified customers over the course of the month can definitely be done."

"Right.  Then the rest of the math is up to the retailer.  He should be able to maintain his closing ratio of 10% and his average ticket of $2,500.  He'll gain four plus customers who will turn into six plus after referrals.  Over the course of the next seven years those six plus customers will spend $62,500."  Michelle finishing tapping her pencil on the numbers and leaned back in her chair.  "Some customers might think it isn't fair to have to wait seven years for their advertising expenditure to provide a proper return on its investment.  But, that's really how advertising works."

"Not only that," I added "but it's not as if they are waiting around.  The next month they'll spend another $5,000 and draw an additional forty-two qualified prospects and as they continue to do this month after month the revenue will quickly grow to the point where $5,000 is well within the expected marketing percentage."

"You've got it, Tim.  Well done.  I hope we'll be spending more time together now that we've broken the ice a little bit."

"I'm sure we will," I agreed.  "One last question.  This picture of a sailboat heading into the sunset looks like the kind of thing someone gives you when you leave a job. . ."

"Yes, it was," Michelle explained as she picked up the frame and looked at it.  "This was a gift from my General Manager, Dick Harlow, when I left Greensboro to come here."

I smiled as I stood up to leave. 

"Dick Harlow," I said.  "I like to think of him as the original dragon rider."

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