The Life Time Value Of A Customer

Here are some interesting thoughts from my round of recent business talks.

Some people talked about marketing “spend”.   Whilst others talked about marketing “investment”.

With a mindset of “spend”, you will probably agree that those who see it as spend are more likely to make it one of the first things they cut down on when times are hard. Those who see it as investment are less likely to do so.

Marketing and advertising are an investment – and a wise one.

Businesses which invest more on marketing are on average more profitable than businesses that don’t.

Economic history also reveals businesses that keep investing when times are hard tend to emerge even stronger than before –

Because: they are ‘front of mind’.

In fact most businesses manage their marketing budgets to suit their internal needs.  What I mean is, they market when they are ready or have something to sell – which is crazy.

People will buy when they are ready to buy and this is not necessarily when you wish to sell.

Here are some typical periods when people wish to market:

Recognise any ?

  • “We need more sales; let’s advertise.”
  • “Nobody is buying this stock – let’s send out a flyer and discount it”.
  • “Our budgets are down – let’s have a sale.”
  • “It’s so quiet, let’s send out an email.”

The fact is marketing should encompass a broader picture of who your clients are.

I have for the past years said Email Marketing is about:

  1. The List;
  2. Your Relationship with your list; and
  3. The Offer you are making your list.

But you must also deliver Value, Value, Value and then you have the right to Offer.

So the big marketing question is, “How much is your customer worth to you ?”

What I mean by this is “How much is the life time worth of a customer ?”

Let me give you an example:

If could make a sale to a new customer and make $1 profit from that sale and you know on average most new customers will buy as many as 40 times would it not be wise to ‘invest’ on a marketing program to lure that customer even if the marketing piece would cost you $5.  Of course you would.

What about if you had a product which yields you $35 profit.  The person may not buy another 100 x $35 but they have stepped onto your ‘Ladder Of Loyalty’.

If you’ve been in business for a while you can measure how long customers stay with you, and how much profit they provide in that time.

Then you discount the sum to determine what you can afford to recruit and retain a customer, allowing for a profit.

It is true that some sales are not repetitive, but in those cases you can often, if not always, cross-sell other things.

This is what we call The Life Time Worth Of A Customer.

If your product has a much higher profit margin than the marketing you do can increase. You could afford a series of very expensive direct communications – DVDs, books, lavish mailing packs and so forth.

But it all starts by thinking in terms not of expenditure, but return on investment, and by taking a lot of trouble to try and assess what a customer is worth.

So to help you…

Many people just don’t know where to start so I am going to offer you this opportunity.

I have several levels of coaching of which anyone may be in your ‘investment range’.

You can access the coaching levels here:  KURT’S COACHING LEVELS.

Take a look at them, email me and start treating advertising and marketing as an investment!

 

Believe In Yourself

About Kurt

I'm passionate about helping people in small to medium businesses get BIG results from email marketing. Email Marketing is about 1. Your List 2. Your Relationship With Your List and 3. Your Offer. When you get the three in unison, watch your profits soar. If you're not sure what I mean. Contact me. I can and will help. Believe In Yourself - Kurt

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