What can a recruitment agency learn from its bank? It’s not how to trade forex responsibly- that’s for sure. Corporate-social responsibility? No, that’s not it.
Banks invest hugely in the lifetime value (LTV) of their customers, which is a more efficient way to increase their revenue. It’s a point of view that recruitment agencies all too often seem to miss.
Quite often, the reason agencies tend not to consider LTV is due to the targeting model in place. Recruitment targets tend to focus on short term results, often to the detriment of long term growth.
The lifetime value model is based on 3 key principles:
- It is easier (and therefore cheaper) to sell to a warm prospect than a cold one
- Customers that have a good experience are likely to buy again
- Customers will need different services at different points in their life
So think about your experience with your bank. Did your bank give you a young person’s account when you first joined? These days you probably have more than one account with them, and possibly a credit card, loan or mortgage. As you get towards the end of your career they will probably push additional products like life insurance and pensions. The whole model is geared towards keeping current business, rather than winning new business.
How does this apply to recruitment?
Using, or at the very least considering the lifetime value model can have major positive impact on your recruitment business. According to about.com, the average worker will change jobs 11 times in their career. So that’s 11 opportunities to place the same candidate, instantly increasing the value of a candidate 10 fold.
If that candidate has a bad experience with your agency during their first job search consider it 10 placement opportunities lost. In monetary terms, using the average salary in the UK (£27000 per annum) and the average recruiter fee (15% according to forbes.com), that works out to a loss of £40,500 per candidate.
Now consider if that candidate gets to the point in their career where they are in a position to hire new candidates themselves at the rate of 2 a year over 10 years. It then becomes 30 placements lost- £121,500 over the course of that candidate’s career. All because the immediate sale (worth £4050) seemed like the most important thing at the time.
What should you do?
- Work out what the lifetime value of a candidate is for your agency. Figures quoted above are just averages. This will give you a good idea of what the average candidate is worth to you.
- Treat every candidate like they are worth that figure. Once this happens, you will begin seeing the true value in long term strategies. For example, keeping your talent pool of candidates warm becomes infinitely more valuable.
- Offer the right product at the right point in the customer life cycle. Candidates will grow and change as their career progresses. Offering them the right job at the right point in their career can facilitate further placements in the future.
That’s why recruitment agencies should think like a bank. But please don’t cause any economic disasters!