What is The Lifetime Value Of A Customer ?

A new client told me this week they stopped sending out marketing materials because it was not worth it.

I asked her if had she done the maths or was it a gut feel?

She said, “The maths doesn’t make sense.”  “For every flyer we drop into a letterbox it costs us around 40 cents.”

And from 1000 flyers we sell around $300-$400 worth of product so we often lose money or just break even.

I then asked, “What is the lifetime value of those new customers you get ?”

Her answer, “I don’t know what you mean?”

So I replied,” You should never measure your marketing success from the first sale but measure it over the lifetime value of making this sale.”

I continued, “How many more sales will you make from this customer and what other products and services can you sell them later ?”

It is what we call the “Lifetime Value Of A Customer.”

Or taking them up the “Ladder of Loyalty.”

Let me explain…

If a customer costs you $40 to acquire but over their lifetime they buy $1000 worth of product isn’t worth spending as many piles of $40 you can lay your hands on ?

I used this very principle to grow my Tax business many years ago.

Here’s what I mean.

Every year we obtained new clients whom we did their tax return for about $50.

As a mindset I would say to myself if we keep this customer for 10 years, they are now worth $500.

If they buy a rental property or go into business they could be worth $200+ a year.  Ten years = $2000.

If they refer to me family members and or friends this could add another $500-$2000 to their lifetime worth.

So although my invoice was saying $50 my mind was saying this new customer is worth $5000 to me.

Can I ask you this ?

Would you treat a customer worth $5000 a lot more special than someone who pays $50 ?

I bet you would and so did my tax consultants once I trained them in this philosophy.

The business grew so much I sold it.  (The money was too good to refuse)

As for my new customer, she still doesn’t want to send out flyers anymore but she has embraced email marketing.

And why not…

It is cost effective and affordable if you have a list of qualified leads and maintain a relationship with them.

If you wish to know how to start doing this the very first step is creating a system to capture Prospects names and addresses.

If you are really serious about doing this then email me.  I always set up 15-minute blocks where I am happy to talk people through this (for free).

But be serious.  I will work out pretty quick what you will need to do.

Kurt

Business Coach, Mentor, Trainer & Author

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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