The Conversion Ratio-How’s Your ROI?

Let’s look at this process in real numbers. You will see how easily a school can lose money or just simply break even by the time they enroll a new student.

In this example, you’ve invested $1,000 for some type of marketing, but how you spent the $1,000 is not the focal point of this illustration. What happened after you spent it is.

The Conversion Ratio is the percentage of people you move from one level to the next. In the three columns are three sample ratios ranging from the good, the bad, and the ugly. Though each school invested the same amount of money in marketing and received the same number of phone calls, the results are strikingly different.

50-Percent Conversion Ratio (The Ugly)

Each example invests $1,000 in the same marketing areas. The investment risk is the same, but the return on that investment is very different.

The right column is a recipe for disaster, yet all too typical. Though this school has done a good job of keeping its cost per call down to just $25, the cost doubles to $50 per appointment because only 20 of the calls are actually set appointments.

Think how easily this can happen. How many calls come in that are not answered or not returned? How many calls does an untrained person answer? How many so-called “appoint¬ments” are really weak promises to stop by? If you track these numbers – and the best schools track them daily – you will see how easily you can land in this dangerous 50-percent rate.

Make sure you and anyone else who answers the phone or responds to an inquiry about les¬sons is fully trained and understands that the goal of the call is to set a solid appointment to come in and take an intro class.

In the 50-Percent Conversion Rate column, only half of the appointments set actually take an intro lesson. This means each intro costs you $100. We’ve checked around, and no one is charging $100 per intro. At the 50-percent conversion rate, you are going in the hole. Sadly, it gets worse. When only 50 percent of those intros actually enroll, each new student costs you $200. If you get $199 as a registration/down payment, you’ve gone through an enormous amount of stress to profit $1.

Again, most of you are not tracking these numbers, but if you did, I would bet a steak dinner you are in the 50-65 percent range for conversions. Sure, you may have a 90-percent intro¬to-enrollment conversion rate, but if you are at a 50-percent call-to-appointment and then appointment-to-intro, you will still be within the overall range of 50-65 percent.

65-Percent Conversion Ratio (The Bad)

In the middle column, a significant bottom-line difference results from just a 15-percent improvement in your Conversion Rate. Though the conversion rate is still not as high as you want, the cost per new student is significantly less. This small 15-percent increase in perfor¬mance yields a huge reduction in your cost per student.

You can see that small improvements yield high results, especially as they are compounded over time. In this example, a 65-percent conversion rate will enroll about 72 more students over a 12-month period. As you will see in the next example, an 80 percent conversion rate will result in nearly 200 more enrollments in a 12-month period over the 50 percent rate and about 120 over the 65-percent rate.

80-Percent Conversion Ratio (The Good)

Take it up another 15 percent, and you get to the 80-Percent Conversion Rate column, which is where you want to be. Every step of the way towards converting a stranger into a student is less expensive. Of course, it’s not profitable until the student enrolls, but in the 80¬percent range, your cost per student is one-quarter that of the 50-percent rate at just $48.

I’d write $48 checks until my hand cramped up if each check would put a new student on my floor. I’d be less enthusiastic at the $90 (65-percent) level, and I’d find another way of mak¬ing a living at the 50-percent level, because I’d be starting off too far behind with each student. If I have to pay $100-$200 per new student, the students have to be into their second or third month of tuition before they become profitable. That is an exercise in frustration.

That’s a stressful way to do business. As clear as this illustration is, many owners do not track these numbers. It’s not that they are lazy; they really don’t want to know how bad a job they are doing at converting strangers into students.

Typically, the owners say things like, “Once we get them in the door, just about everyone signs up.” They complain marketing doesn’t work in their area, or that the economy is bad, or that the belt factory school down the street is selling black belts or – my favorite – ”We’re not a commercial school.” The truth is that they are paralyzed by the Control Factor and would rather protect their little puddle than take the time and risk to the ego to learn how to set appointments, teach smart intros, and close on an enrollment conference. In short, they are afraid to ask for the check. Re-read Value What You Do.

MATA has excellent resources and scripts for this entire process, so getting the good information is not the challenge. The challenge is breaking out of the box to use it.

Many owners say they just want to teach. They don’t like the business of selling. They want someone else to handle the conversion process. That’s understandable; however, you must learn how to sell first. Otherwise, who is going to train your front-line people?

You can’t print out a few pages from MATA, hand these to your employees, and expect them to keep an 80-percent conversion rate. You have to know this process inside and out, so you can teach it like a professional martial artist.

As the school owner, you have more interest in creating a solid process for converting students into strangers than anyone. If you don’t care enough about your business to learn, role-play, and train how to improve this system, no one else will.