Marketing Strategy - Lifetime Value of a CustomerWould you spend $1 to get $5? 

Would you spend $1 to get $10? 

You can if you understand the lifetime value of your customers.

Business owners like you have that opportunity to get a great return on their investment.  As marketing consultants and business advisors, we help business owners understand the true value of their customers.  We can then help with a strategy to help acquire more customers.

But you can figure out the value of your customer.  Let me give you a couple of examples.

Tire Company: A tire company gets about $200 per tire.  Most customers buy 4 tires.  That means one sale is worth $800.  If the tire company spends $100 to get a customer, the are getting back 8 times the money, right.  However, that customer may come back in 2 years and maybe again in 2 more years (they are rough on their tires and do a lot of traveling).  That means that the customer will come to the store 3 times buying tires for $800 each time.  Now the lifetime value of the customer is $2400.  Would you spend $100 to get $2400!

Hair Stylist: A hair stylist that charges $60 for a cut and curl.  On average her customers come to her every three months.  The yearly value of her customer is $240 ($60 4 times a year).  All she has to do is determine, based on her records, how many years an average customer stays with her.  Let’s say, they stay with her for 4 years.  The lifetime value of a customer for her is $960 ($240 x 4 years).  If she spends $100 to get a customer, she will get almost 10 times the return on her investment!

 

You try it: Pull out a piece of paper and jot down these figures:

1. Write down how much the average customer spends at your business.

2. Write down how many times they come into your business. (How many times a year X how many years the average customer continues to do business with you.)

3. Multiply those two numbers.

It is that simple.

If you are having trouble with these number, we would love to help. Get in touch with one of our experts today.

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