This is another very common mistake... Thinking that the deal is done all in the first transaction(s).
Let me explain...
Many companies see the value of a client simply as the value of all the purchases that customer has made to date, so for example, if a client has bought a product from you worth £300, they would see this client as only being worth £300 to them.
Looking at the value of a customer in this manner is not only quite simplistic, but also quite dangerous, in that it can never give you any indication of the TRUE lifetime value of your customers, or... The average expenditure of a customer with your company, over the period of time between their initial and final purchases.
Having a good idea of what the TRUE average lifetime value (LTV) of a client is essential to knowing how much you are able to spend in acquiring each of your customers at the ‘front end’ i.e. what you need to spend to acquire that initial new lead or client.
For instance, if your average customer purchased a product worth £300, once a month, and ‘stayed with you’ for on average, 12 months, then their lifetime value would be £3600.
(Please email me at andrew@maverickmarketingconsultancy.co.uk if you would like to receive a very helpful spreadsheet to calculate your own clients’ life time value)
Therefore knowing what your client is truly worth, over the course of their lifetime with your business, means that you may in fact be able to spend more than £300 “up front” in acquiring each customer and still make a profit in the long term.
So continuing with this example, imagine what might happen if instead of £300, we spent
£400 or £500 at the front end? This could mean dramatic growth for your business.
Essentially, increasing the lifetime value of your customers comes down to three objectives; increasing the length of time a customer buys from you, increasing the amount they spend on each purchase, and decreasing the time between purchases. This can be a very powerful
set of strategies, as a 10% improvement in each of these three categories will increase your sales by 34.4%.
To claim your free copy of my detailed-rich white paper “The 7 CRITICAL Marketing Mistakes Nearly Every Business Owner Makes... And What YOU Can Do To Avoid Them!” (Value £30.00)visit www.maverickmarketingconsultancy.co.uk and subscribe for free to the Maverick Marketing Newsletter.
