I’ve been in the business world for almost 10 years, and I know most savvy business owners understand the importance of maintaining a good relationships with their customers. They know happy customer will keep repurchasing for many years. However, most cannot answer if you were asked them what’s the actual value of a lifetime customer is.Once they knew the answer , most businesses will not go cheap in customer acquisition and retention. Jay Abraham, the super marketing guru that charges USD50,000 for business consultation had this to say in his book, “Getting Everything You Can Out of All You’ve Got”:
“The current lifetime value of one of your clients is the total profit of an average client over the lifetime of his or her patronage – including all residual sales, less advertising, marketing, and incremental product or service-fulfillment expenses.
Let’s say that your typical new client brings you an average profit of $75 on the first sale. He or she repurchases three more times a year, with an average reorder amount of $300, and on each $300 reorder you make $150 gross profit.
Now, with the average patronage life lasting two years, every new client is worth $975. You could theoretically afford to spend up to $975 to bring in a new client and still break even.”
When you see $975 as the value of a lifetime customer, you will know your initial expenditure is indeed an investment .
“The current lifetime value of one of your clients is the total profit of an average client over the lifetime of his or her patronage – including all residual sales, less advertising, marketing, and incremental product or service-fulfillment expenses.
Let’s say that your typical new client brings you an average profit of $75 on the first sale. He or she repurchases three more times a year, with an average reorder amount of $300, and on each $300 reorder you make $150 gross profit.
Now, with the average patronage life lasting two years, every new client is worth $975. You could theoretically afford to spend up to $975 to bring in a new client and still break even.”
When you see $975 as the value of a lifetime customer, you will know your initial expenditure is indeed an investment .
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