The Millstone Times

The formula for calculating the value of a customer is simply this: Customer Lifetime Value = Sale Price – Cost of Goods Sold. A customer Lifetime Value includes: 1.First Sale 2.Repeat Business from first sale (The purchases over this span of time get added into the sale price and cost of goods sold in the formula above.) 3.Referrals/ Recommendations (How many new customer referrals on average do you receive from one new customer?) 4.Positive Feedback for both public forums and internal forums 5.Community Branding, Presence in community, referrals from community members who have never used your services but recommend. Example – Business ABC- (minimum repeat business) Business ABC’s average customer buys once with a typical sale range of $350 – $950 with the average sale price of $650. The profit of the average sale is 71% totaling average of $461.50 PROFIT. Let’s assume customers are pleased and refer others with an added sale average of 2 future sales. With this information we can now calculate accurately that the lifetime value of “ne new customer" for Business ABC is $1384.50 Example – Business XYZ (average repeat business) Business ABC’s average customer buys 4X in lifetime with a typical sale of $785. The profit of the average sale is 68% totaling average of $533.80 PROFIT per sale and $2135.20 for the repeat business Let’s assume customers are pleased and refer others with an added sale average of 6 future sales (more of a repeat business). With this information we can now calculate accurately that the lifetime value of “one new customer” for Business ABC is $12,811.20 Marketing is a mathematical equation. Investing in your business with accurate math and accrual data is what varies one business owner’s total income with another business owner selling the same service or product. Keep in mind that this accurate mathematical formula for evaluating the value of one new customer does not even include the need to maintain customers and develop customer loyalty. For a free, no pressure marketing proposal with no obligation that includes sourced data, please call 732 995-3456 or info@guntherpublications.com Once you know your customer value, you can begin making advertising decisions based on hard data – not on guesses and hunches. Once you know your customer value, you can begin working to track it more closely and increase the value that you are providing to your customers. Remember – what you give comes back to you. As you increase the value that you’re providing to your customers, your customer value will also increase. Knowing the value of a new customer is essential for accurately measuring and increasing the return you receive on your advertising investment. WHAT IS ONE NEW CUSTOMER WORTH TO YOUR BUSINESS?

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SOURCE: MYMARKETINGPARTNER.COM

50 The Millstone Times

May 2021