When you think about marketing, you think about generating new leads, right?
Generating new leads is an important part of any marketing system.
But chasing new leads can be expensive. You often have to have an ad. That ad needs to be performing well. You have to send traffic to that ad. You have to convince the leads generated by the ad to buy.
Getting new business from repeat business and referrals takes a lot less time, money, and energy.
These people already know, like, and trust you.
If you plan to focus on generating more referrals and repeat business there is a metric you will want to track. It’s called Return on Relationship.
How to Calculate Return on Relationship
Return on Relationship, or ROR, is something I picked up from fellow marketer Dean Jackson.
ROR is a metric that measures how well you are doing at generating repeat business and referrals. Here’s how you calculate ROR.
First, calculate your total number of customers who have ever bought from you.
Next, write down the number of customers you have helped in the past 12 months.
Of those people that you helped in the last 12 months, write down the number who came to you as a referral or were repeat customers.
Divide the number of repeat customers and referrals by your number of total customers. That number is your ROR.
Here is an example calculation:
| Total Customers | 1,000 |
| Customers in Last 12 months | 250 |
| Referrals & Repeat customers in last 12 months | 50 |
| ROR | 5% |
Moving Your ROR
What does the example above tell us? One thing it tells us is that you didn’t have to spend any money (or very little) to acquire that 5% of all your customers.
Take a moment to think about that number. What does your gut tell you? Does the number feel low? About right?
I find that most people feel their ROR should be higher. The good news is, ROR is generally easy to improve once you focus on it.
Like most metrics, it’s not the single number that is important. What is more important is moving that metric in the right direction.
Imagine if you could double or triple your ROR – what would that do for your business? Can you think of ways to increase your ROR?
Leave a comment below and let me know.
