Know the lifetime value of a customer and you are ready to dominate your niche!
As you previously discovered in part one of this series on accurately calculating the total lifetime value of a customer to your business, product and or service.
Once you tabulate this number, you are now in a much better position to determine how and what type of marketing strategies you can safely afford to use in order to create a ton more business, for a fraction of the traditional cost.
Once You Know And Understand The Total Lifetime Value Of A Customer You Now Know Exactly How Much Money Your Business Can Safely Afford To Spend In Order To Attract Or Create A Brand New Customer!
For ex; as you recall from the previous illustration in part one. The hair salon actually had a total lifetime customer value of $10,800 dollars!
And each individual customer was worth $45 dollars per visit or $540 dollars per year.($45 per visit x 12 visits per year = $540 dollars total.)
And since the typical customer would (on average) spend that $540 for at least five years, for a grand total of $2,700 dollars. ($540 dollars gross per year x 5 years = $2,700 gross profits.)
And since they would refer (on average) at least ten more people to your shop and 40% of them (or) four people would actually remain long term customers (and) strictly for the sake of example, suppose those four new long term customers are worth $2,700 each over the next five years as well.
Twenty seven hundred times four is where the grand total of $10,800 dollars comes from. ($2,700 x 4 =$10,800)
With The Correct Information In Hand You Can Now Start Building A Potentially Profitable Sales Funnel!
Let’s now focus on that annual amount of $540 dollars gross front end profit for a second. Since you’ve run your numbers and you realize that your typical customer will spend a total of $540 dollars per year.( Or X.) So since you know that you’ll gross $45 dollars per visit or X.
The question really becomes, how much can your business or service really afford to invest in order to get that new first customer into your shop for the very first time?
Or how much can you safely afford to invest in order entice an old or currently inactive customer/patient back?
Obviously you now realize right off the bat, that under no circumstances would it make financial sense for you to be investing more than a grand total of $45 dollars per lead,correct?
Your Marketing Funnel Will Definitely Produce Long Term Profits When The Math Makes Sense!
Hopefully you now see and realize how dangerous (wreck less) and misguided it is to simply allocate X amount of dollars for advertising /marketing your business,products or services, without first taking into consideration how much each new or returning customer is really worth to your business! Correct?
That’s why it’s vitally important to know and understand the benefits of the lifetime value of a customer to your business.
You Can Start To Strategically Out Promote Your Major Competitors For Pennies On The Dollar By Knowing The True Lifetime Value Of A Customer To Your Business!
For ex; suppose your offline business (still) for whatever reasons, doesn’t have any of your customers and clients (all important) email addresses. So currently you don’t have the luxury of contacting them via email.
And just for the sake of example, let’s say your hair salon has a total of 1,200 customers physical mailing addresses.
And as your preparing for tax season, you discover that an incredible 27% of your customer base is (for whatever) reasons, currently inactive! Meaning- that haven’t been to see you in over six months! Ouch!
That equals 324 people! (1,200 x .27% = 324 no shows!) Now it definitely makes economic sense for you to send them a postcard (or two) or three and invite them back!Don’t you agree?
And bribe them for doing so! You realize that their gross yearly value for the remainder of this year is now only half of what it would normally be.
Meaning, you’re only going to gross (at best) $270 dollars instead of the typical $540. ($540 x .50 =$270 dollars gross profit.)
This Is Where Some Extremely Well Thought Out Direct Marketing Strategies And Or Tactics Will Definitely Serve You Well!
So under no circumstances can you afford to spend more than $270 dollars on each of these inactive customers.Right?
Well, actually you could, because you know what their truly worth to your business over time! But in order to keep everything simple and in the right perspective, you shouldn’t think beyond the next six months, for this particular example.Correct?
So what if you invite them back, by ethically bribing them with two big bonuses.
A.) As long as they come back by whatever date that you mention on the card, you’ll give them a coupon that entitles them to a nice juicy 20 LB turkey (or) the meat of their choice in order to celebrate the Thanksgiving/Xmas holiday season!
You’ll simply purchase a gift certificate at one of the extremely popular local super markets and give it to them.
This Is Also A Proven Way To Take Your Lead Generation Strategies And Or Tactics To A Whole New Level Or Two!
B.) And you’ll also allow them to get their next three washes and rinses for just five dollars apiece, instead of the normal cost of X!(And specify how much they’ll be saving off the normal retail price!)
But only if they call and set an appointment by a certain date! And as long as your customer (for this) particular example only, is not in their fifth year of patronage with your business or service.
This type of promotion really makes economic sense, don’t you agree? Hopefully, you can now see, how truly simple it would be to start systematically out promoting your big buck major competitors for a fraction of the traditional cost!
Simply by knowing and understanding the true lifetime value of a customer to your business,product and or service. You are free to really get creative in your marketing and think way outside the box, don’t you agree?
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And really start to dominate your niche.
