Lifetime Service

"Lifetime value is expressed as the total dollar value of your average customer over the entire period that they are likely to do business with you .."
- Bob Serling

Determining a customer's lifetime value can reap big profits as you grow your business. But if you are like just a phase all owners of small businesses, you probably have never given lifetime value of your customers and thus forfeiting maximum income potential.

Do you understand what your customer's lifetime value?

Would you recognize why the knowledge of your customer's lifetime value is important? If you do not understand the answers to these two questions read on.

Too many companies see their customers as just a single purchase or perhaps a single purchase, plus an additional backend purchase rather than understanding lifetime value of their customers.

"Lifetime value is expressed as the total dollar value of your average customer over the entire period that they are likely to do business with you. "- Bob Serling
So how do you get the lifetime value of a customer?

Finding lifetime value of your customers takes for granted that you have multiple items to offer your clients. Backend sale items may be yours or some affiliate product, but you must have a series of follow-up things (products on the market after the first sale) to sell so that your customers have a number of opportunities to buy from you.

If you've been in business for a while, first find out the average time a customer stays with you. Next take the net profit you have earned during that period and dividing it by the number of steady customers you have.

For example, let us assume that you've been in business for six years. You see your client list and find out that on average, your customers continue three active years with you before it fell into inactive status. Over the past three years your total net profit of $ 480,000, and your customer list numbers 1750 active customers.

To getting the lifetime value of each customer, you use the following formula: Lifetime Value = Net Profit / stable customers, or in the above case it would be Lifetime Value = $ 480,000 / 1750 or $ 274.28

So why is this significant. Because, now you know that every new customer you acquire is worth $ $ 274.28 to you than the average customer life of 3 years. Now you can calculate how much you can use to get a new customer, and continues to make a profit.

Let us now see some examples of how we can use this information.

For the purposes of this example let us consider that you have an Internet business with a website designed to sell your products. Let us further suppose that you are operating a Pay-Per-Click marketing campaign. You have calculated that one out of every hundred visitors to your site converts to an actual paying customer. You have a keyword that you bid 50 cents on. Which means that for every 100 customers you get through this particular ad you want to convert one to a customer in order to acquire this could cost you $ 50.

[Note: If you are offline, running a business, the same principles to be applied direct response advertising, replacing pay-per-click with a written advertisement that allows you to track your responses from this ad.]

Let us now say that the product you sell this website sells for $ 39.00. Many website owners would assume that the Pay-Per-Click campaign that keyword was a failure because you just spent $ 50 for favor of a new client who bought a $ 39 U.S. dollars account. This is a first loss at $ 11 for every new customer you get through this campaign. But the longer believe that $ 50 U.S. dollars you actually earn on average $ 274.28 for each new customer over a period of three years for a profit of $ 224.28!

Now, instead of being a failure, your salary can be per-click campaign should be considered a great success. Spend $ 50 and get $ 224.28 back. How often will you do it?

Sell to your existing customers is always easier than getting new customers. You have already earned their trust, they have already bought from you, and if the product or service they bought from you were of high quality and meet all their expectations, or if you over delivered, they are most likely to buy from you again. Satisfied customers are repeat customers.

So if you want to maximize your earnings, find out the lifetime value of your customers and design customer acquisition campaigns that will skyrocket your total net profit instead of campaigns only consider an initial sale.

About the Author:

George Dodge owns Small Business, "BIG" Profits, host of Bob Serling's Master Marketing Course for Small Businesses that Can More Than Double Or Triple The Number Of New Customers Or Clients You Bring Into Your Business.

Article Source: ArticlesBase.com - Small Business Marketing: How To Determine The Lifetime Value Of Your Customer!

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