Flipping the Recruiting Funnel Series – Average Lifetime Value
In the introduction to this recruiting funnel series, I briefly touched on what the marketing/sales funnel is and how it relates to your recruiting. As we move forward I will cover one step of the recruiting funnel in each installment of this series, covering common mistakes made in these stages as well as pointing out some important metrics that the Randall-Reilly recruiting team recommend you take a look at, if you aren’t doing so already.
Flipping the funnel and starting at the end, working your way backwards can provide valuable insight into what is working or not working for you, and why. That’s why the first portion of the funnel we are going to tackle is the final step in your recruiting process. The convert phase.
But before we get to the funnel itself we need to talk about what flipping the funnel can actually do for you. Add value. After all, you don’t just need to find drivers. You need good drivers. Quality drivers. The drivers that provide you with the most value. So, to kick things off, let’s start with average lifetime value.
Average Lifetime Value
Average lifetime value is something very important that many don’t even think to consider. But, before I go too deep here let’s make sure we’re all on the same page. What do I mean by average lifetime value? I’ll start by trying to explain it in broad terms and then hone in a little more to apply it to driver recruiting.
Let’s say you own a small convenience store and you have two regular customers. Customer #1 comes in once a month and spends $200 every time. Customer #2 stops in once a week and spends $60 each time. Although customer #1 spends more money per visit, it’s actually customer #2 who spends more money in your store over the course of the month. As a store owner, customer #2 is more valuable than customer #1. It’s not simply about one transaction, but the value provided over time.
Average Lifetime Value as it Applies to Your Fleet
This same concept can apply to your fleet. Instead of looking at what customers provide the highest value over time, let’s look at what kind of drivers provide your fleet with the most value and benefit over time. A quick and easy way to do this is to multiply a driver’s time in the fleet (months) by the average revenue per driver per month.
Time at Fleet x Driver Average Monthly Revenue = ALTV
So, if your fleets drivers averaged $1000 in monthly revenue (for simplicity sake) to your fleet, and a particular driver had been with the company for 5 years (60 months), that driver’s lifetime value to your fleet would be $60,000.
The industry average for driver revenue per month is $11,500. However, for budgeting purposes it’s important to remember that your fleet’s numbers could vary from the average.
In a nutshell I’m talking about finding the highest quality driver for your fleet that will provide the most value to you over the course of time. Why should this matter to you? Let’s say you hire a driver for $900. You might think that’s pretty good. But, what value does he/she provide to you over the long-term? If they only drive for a month and then leave, even though your CPH was $900 they didn’t provide you with any real value. Not only did you spend the $900, but now the driver is moving on and you have to spend more money to replace them.
What if you hire a driver for $2,500? But, unlike the previous driver they end up staying with your fleet for 10 years. Even though the second driver’s CPH was higher by $1,600, this driver provides you with a higher lifetime value over the course of their time with your fleet.
Generally speaking, the longer a driver is with your fleet, the more value they offer. That’s why retention is so important in the trucking industry. A longer tenure at your fleet means more revenue generated. If at all possible, maintaining the drivers you already have not only increases the value provided to your fleet but also reduces the number of open seats you need to fill.
Taking Different Factors Into Account for Average Lifetime Value
The important takeaway for this concept is to try to focus on value…not costs. Finding the average lifetime value allows you to identify what kind of drivers provide your fleet with the most value. This helps you better target and pursue these drivers moving forward.
It’s a simple concept but can sometimes get lost in the shuffle of CPL and CPH discussions. Take a look at your numbers and work out what a driver’s average value for your company is. Is there a certain driver type that your fleet has better retention with? What kind of drivers provide you with the most value? Student-drivers, company, owner-operators?
Find out which driver type is actually most valuable to your fleet (this is not always necessarily the cheapest) and pursue those drivers. Though you may initially spend more (higher CPL and/or CPH), you can more than recoup your spend through driver retention and the extra value the driver provides over time.
Learning driver lifetime values, and what driver types provide your fleet the most value can help steer and shape your recruiting budget. Find out what works for you and apply that moving forward with your recruiting spend. A good way to get the most out of this information is with Randall-Reilly’s Recruiting Budget Calculator.
Fleets are super competitive and drivers have a ton of options in front of them today, so just landing a driver to fill a seat can sometimes become the main focus. But, you must always strive to not just find a driver, but to find a high quality driver. And that’s exactly why taking the lifetime value of a driver into account is so important. Next week we begin to cover the funnel, starting with the convert phase.