Do You Know What The Lifetime Value Of Your Client Is?

Do You Know What The Lifetime Value Of Your Client Is?

Hi Business Owner,

My name is Bob Britton, a fellow small business owner and President of Marketing Automation Group.

The name gives the concept away, and it’s so simple that we remain dumbfounded that so many people in business never consider it.

Here’s what it’s all about. By definition, the Lifetime Value Of A Client (LTV) is the total profit produced by an average client over his/her lifetime association with you. Once you know your average clients lifetime value you are then in a position to make a judgment on how much you can afford to spend to convert a prospect into a client.

For example, let’s say that the first time your average new client does business with you she spends $150.00 ($100 for some repair, $50 for an oil change, and tire rotation) she comes back or you go to her every 6 months In the course of one year she is potentially worth $300.00 to you just for service work. She is going to be your client for 7 years. (Then she moves to Florida or gets a divorce, because “life is a moving parade”) In 7 years, she will have spent a minimum of $2,100 with you.

Now you have to figure out how much of that is profit to you. Let’s say its 50%. So you (theoretically) will make $1,050.00 profit on your average client over the next 7 years.

How much are you willing to pay to get a client? You could spend up to $1,050.00 and still break even in 7 years. We don’t suggest that. But up to $50.00 seems reasonable. Wouldn’t you invest $50.00 to get $1,050.00 back in 7 years? But you don’t even have to wait the full 7 years to start getting it back. On the first sale you make money, more than enough to recover the $50.00

Let’s say that your average client refers at least one other client to you. Now your profit from that client is $2,100.00. $1,050.00 from the first client, at $1,050.00 from the referral. Referrals are even more profitable than clients gotten through advertising.

Start calculating the lifetime value of your average client. One of your goals should be to increase this value by getting your clients to refer more often, increasing the average ticket, making repeat clients more frequent, and selling them more product and services.

This is a mistake that many, many business owners make, especially business owners. What this means is that you do not know what your clients will want or how they will react.

We’ve heard lots of business owners tell us that ‘Well, my clients won’t like that or respond to it’. This is a huge mistake. You are not your client. You don’t know what your client will or won’t do until you try it.

Please don’t call us up and say, “This will never work with my clients.” First of all, that’s very foolish. You don’t know what will or won’t work with your clients. Second of all, these marketing strategies have been tested all over the country. They work. Period.

If you can’t get something to work, call us and we’ll help you get it to work.

We had one business owner tell us, ‘I tried this and it doesn’t work.’ This would be like questioning the laws of aerodynamics every time a plane crashed. No one does that. They ask what was wrong with the plane or what mistake the pilot made.

What he should have said was, ‘I tried this and I couldn’t get it to work.’ Or even better yet, ‘I tried this, I couldn’t get it to work, do you know how I can get it to work?’ Then we would have explained what he was doing wrong so he could correct it. He ended up losing thousands and thousands of dollars because he was so sure this didn’t work!

If you are trying a new product, like a new software program, ask your clients if they would be interested in buying some from you. See what they want in software and see what they don’t want. Then give them what they want.

If you don’t do that, then you need to test small. For example if you find a software program that you think is fantastic and you think your clients will buy it, – don’t buy 100 units and then find out that your clients hate it. Buy a small amount of inventory and see if you can sell it. If you do, then buy a little more. Start small and work your way up. Always remember that you aren’t your own client!

If you have any questions, need some immediate advice, or would like to get involved with my program please give me a call at 585-633-7563.

To your success,

Bob Britton