Average Lifetime Value of Drivers: What Metrics Matter?

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Average Lifetime Value?

What is it?
Why should you care?

Average lifetime value is the amount of revenue generated by a driver. You may think of this as primarily a function of operations, but those in recruiting can have a significant effect. Put simply, the more efficiently you bring in quality drivers, the more money your company makes. Average lifetime value should be relevant to you no matter market conditions, number of empty trucks, or current turnover rate.

In my time talking to folks at different fleets I’ve noticed that things can be siloed across departments. The recruiting department focuses on getting drivers to orientation and operations focuses on moving freight. Though these departments are inextricably linked, there is many times a wall between them.

With that wall, those in recruiting tend to focus on cost rather than value. A cost focus, will force you to monitor metrics that aren’t predictive of revenue such as cost-per-lead, cost-per-click, or even worse cost-per-impression. Average lifetime value changes the way you look at metrics such as cost-per-hire and cost-per-approved application.

With that in mind let’s discuss how you can change your focus to value and build your recruiting around producing revenue rather than cutting costs. Let’s work backwards from average lifetime value (ALTV) and try to identify inefficiencies that can drive value down. We will use the traditional marketing/recruiting funnel — target, connect, engage, and convert as our outline.

Average Lifetime Value

This is the main event. The most important metric for recruiting that you can track. Your focus should be to increase the amount of value your company gets from the drivers you hire. This is accomplished by discovering the inefficiencies within your process and finding the methods that bring in the most profitable drivers.

ALTV Equation

Average time at fleet x average revenue per driver by month = ALTV

Helpful Hint:

The industry average for ALTV is $11,500 in revenue per driver per month. However, it’s best to find your own.

Convert Phase

How many of your leads actually convert? You can increase your efficiencies by increasing your lead-to-hire rate. The 2 main areas to focus on are the effectiveness of your recruiters and lead-to-hire rate by response type. In this phase we look more at what types of leads are converting best. Usually recruiters work best with either inbound calls, inbound short or long forms, or multi-carrier leads from job boards. However, don’t forget to relate it all back to ALTV. A cheap hire is meaningless if that driver leaves within a month.

Recruiter Efficiency Equation

Inbound responses per month / scheduled for orientation

Lead-to-Hire by Response Type

Lead-to-Hire Response Type Chart

Engage Phase

In this phase you want to create the clearest picture of your cost-per-hire. It’s really important to break it down by any relevant parameter that can affect cost. You will want to divide it up by vendor, placement, driver type, division, etc. You’re looking for areas that could be driving up your cost-per-hire or possibly providing drivers that aren’t profitable for your fleet. If you’re a pro at tracking, you could create a list of your unprofitable drivers and track back to the sources of their hire. Then look for correlations and clusters of data.

Connect Phase

Your focus in this phase should be lead flow and driver experience. You want to increase your “lead velocity” which means decreasing the time between lead submission and orientation. In addition, you want to optimize the time recruiters spend on the phone. It’s also important that lead volume is appropriate for each of your recruiters.

Things to Track in the Connect Phase

  • Unanswered Calls
  • Speed to Contact
  • Recruiter Capacity
  • Lead Velocity

Helpful Hint:

Our research suggests the optimum number of inbound responses per month per recruiter is around 500 – 600.

Target Phase

On average 55 – 60% of the leads you talk to will be unqualified. Your focus in this phase will be lowering that percentage. It’s important that you place mechanisms in place to weed out unqualified drivers. This includes knockout questions, better targeting, and geo-specific campaigns. It’s important that you know the main reasons your leads are disqualified. It will tell you which of the previously mentioned measures will help mitigate the amount of disqualified leads you’re receiving.

In Summary

If you notice, absent from the metrics we tracked was cost-per-lead. According to our data CPL, CPC, and CPM have no correlation to cost-per-hire or ALTV. It’s important that as you work through this funnel you constantly relate it back to value and not cost. Remember you have a profound effect on the value your fleet produces.