Strategy 1: Understand The Life Time Value Of Your Customer
This is the most important concept I’m going to discuss. Everything you do is predicated on this – so pay attention!
The lifetime value of a customer is the total profit that a customer brings to your business over the lifetime of your relationship with that customer.
The following example will illustrate why it’s important to know this number:
Suppose you own a Pizza restaurant. If your customer spends $20 every time they visit, and they come twice a month for three years, a customer is worth $20 x 24 x 3 = $1,440.
So if you were thinking in terms of only one transaction – think of how much money you’re missing out on?
Here’s another real example.
A business associate with ours sells Meditation CD’s. The initial CD set is worth $350. He knows that over the lifetime of a client, a significant number will spend somewhere between $10,000 and $20,000 with additional products!
Knowing his numbers he can afford to spend a significant amount of money on advertising to get people in the door – knowing he’ll make it up ON AVERAGE over the customer’s lifetime.