Relevant Marketing LLC

The Value of a Lifetime Customer

By Justin Stranere on April 5th, 2010

Most savvy business owners understand that it’s important to maintain good relationships with their customers and keep them repurchasing for many years. That being said, most would be hard-pressed to give you a dollar amount if you asked them what the actual value of a lifetime customer is.  

 

Have you ever calculated the Lifetime Value of one of your Clients ??

Value of a Lifetime Client

I think this is important because once they knew this number, most businesses wouldn’t be so frugal & cheap on customer acquisition and retention, (hmm, perhaps a monthly customer newsletter?)

Jay Abraham, wrote an awesome book, Getting Everything You Can Out of All You’ve Got, and chapter 5, “Break Even Today, Break the Bank Tomorrow,” addresses this topic in a marvelous way. The following excerpt is from Jay’s book.

“The current lifetime value of one of your clients is the total profit of an average client over the lifetime of his or her patronage – including all residual sales, less advertising, marketing, and incremental product or service-fulfillment expenses.”

Let’s say that your typical new client brings you an average profit of $75 on the first sale. He or she repurchases three more times a year, with an average reorder amount of $300, and on each $300 reorder you make $150 gross profit.

Now, with the average patronage life lasting two years, every new client is worth $975. You could theoretically afford to spend up to $975 to bring in a new client and still break even.”

So let me ask you, when you see $975 as the value of a lifetime customer, doesn’t it seem a little silly to be so frugal in both your customer acquisition and customer retention efforts?

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showing you how to calculate the value for one of your customers,

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2 Responses to “The Value of a Lifetime Customer”

1. MarkSpizer says:

   May 3, 2010 at 6:53 am

   great post as usual!
2. Lifetime Value of a Customer | Relevant Marketing LLC says:

   July 29, 2010 at 1:50 pm

   [...] MarkSpizer on The Value of a Lifetime Customer [...]