by Larry Lim
The greatest asset to your business is your Customer, In my many years of Sales and Marketing, I've met many CEOs and This's one of the fatal mistakes that many business owners make; I don't know you personally, but if you're a smart business owner, -------------------------------------------- Customer Lifetime Value is defined as the total value, in Here's how to calculate your Customer Lifetime Value: 1). Let's say you've 2,000 steady customers and these customers The Customer Lifetime Value can be calculated as: What this means is that over an average customer lifespan of 2). If you don't have the actual figures, you'll have to ------------------------------------------------- Lifetime Customer Value is important to you and your business 1). Knowing the Lifetime Value of your customers is crucial to When you know the Lifetime Value of your customers, you can In other words, you can invest more today to reap a much larger Every marketing campaign that you undertake costs you money as 2). When you realize that customers are actually an ongoing Instead of contantly struggling to acquire more and more new
specifically, your Customer Lifetime Value.
business owners who don't have much clue as to what Customer
Lifetime Value is, much less its importance and the impact it
has on their bottomline. To most of them, what matters most is
to increase revenue by continuously acquiring new one-shot
customers.
it's a sad scenario, but it's also the reality. Let me tell you
something: it'll cost you 5 times more to attract a new customer
than it is to bring one of your past customers back to you.
you'll understand that every cent you invest in advertising is
going towards acquiring new customers. You'll also realise that
once you've acquired the customers, you just can't afford to let
them go.
So what's Customer Lifetime Value?
--------------------------------------------
monetary terms, of your average customers spanning the entire
period that these customers are likely to do business with you.
It's the potential contribution of your customers to your
business over a period of time.
remain with you for an average of two years; for the past two
years, your net profit was $700,000.
$700,000/2,000 = $350.
two years, each new customer you could acquire and keep is worth
$350 to you in profits.
estimate. As the Customer Lifetime Value will have a significant
impact on your bottomline, my advice is that you be prudent and
conservative in your estimation.
Why is it so important to you and your business?
-------------------------------------------------
for the following reasons:
you and your business as it serves as a benchmark without which
you'll be groping in the dark.
determine how much time, effort and money you can afford to
invest to acquire that customer in the first instance.
profits later down the road as long as your cashflow is healthy
and can support it.
well as reaping you benefits such as increased sales, enhanced
corporate image, etc. But how can you be sure that the benefits
would outweigh the costs or investments? This's where knowing
the Customer Lifetime Value is so powerful - it helps you to
determine this even before you launch your marketing campaign.
stream of revenue as opposed to a one-shot sale, you can re-focus
your marketing efforts.
customers, you can now begin to focus on keeping your existing
customers longer and selling to them repeatedly, in other words,
repeat sales.
You may spend more like making stronger and more attractive This makes sense because you now know that on average you'll more Start shifting your focus to Customer Lifetime Value and maximise Start to have a proper understanding of Customer Lifetime Value Copyright Larry Lim, MarketingSphere. About the Author
Larry Lim is a marketing strategist and tactician who Check out his website - http://www.marketingsphere.com - that is
offers than your competition in acquiring new customers now who
will be your money spinners tomorrow.
than make it back over the years that the customers are with you
and therefore you could afford to break even or even lose money
now in acquiring the new customers.
your profits today.
because it's key to the success of your business. It'll allow
you to acquire more customers than your competition through
better and more attractive offers; it'll dramatically increase
your bottomline through more repeat sales and shoot your profits
through the roof.
dishes out effective marketing strategies and tactics that will
enable you to successfully start and grow your business on the
Internet.
jam-packed with secret marketing information that will skyrocket
your sales, and shoot your profits through the roof.