Do you know the most important number in your business?
I bet that 9 out of 10 people reading this don’t know the answer to that question.
That’s OK, because neither did I until not so long ago.
But here’s the thing: knowing the answer is super, super-important.
Because if you don’t know the answer, you could make some big mistakes.
That number is: Lifetime Customer Value. Or, in English, how much a customer is worth to you. How much they spend in their entire lives with you.
Consider this:
Imagine you are a real estate agent. What is your average commission? (And even if you are not a real estate agent, the same logic still applies.)
Then, think about how many times a client could, in theory, come back to you in their lives.
If you agree that a person moves home every seven years or so, there’s a good chance that they will use your service maybe three or four times.
So, that average commission should be multiplied by at least three to find the Lifetime Customer
Value.
See how valuable each client is?
Or maybe you are in the insurance business. How much is the average commission you earn from a client for a typical policy?
Then consider: how many years could they keep renewing that policy?
How many other policies could you sell them?
How much does that add up to? Quite a lot, I would imagine.
This is why this number is so important.
The trouble is, most people have no idea how much a customer is worth, so they tend to assume a customer is worth just the value of the first sale.
They ignore everything else!
And that leads them to make some bad decisions.
For example, they cut your own wrists when it comes to marketing because they think they can’t afford to spend money on marketing (because they think a client isn’t worth that much).
Or they forget to follow up with clients and keep in touch with them because they don’t know that their lifetime value is many multiples of the value of the first sale.
Or they just go after new customers (instead of retaining existing clients) because they mistakenly believe that the value is that first sale rather than where it really is, which is in the follow-up sales.
So here are my questions:
What is your average Customer Lifetime Value? And if you don’t know the answer (that’s OK), how much could it be if they bought from you as much as you think they should? (Remember, if you offer a valuable product or service, people should be buying from you more.)
Nice number, isn’t it?
Makes you look at your business in a whole new way.
Something to think about
Newsletters can help you raise your Lifetime Customer Value. Why? Because they help you keep in touch with customers and sell them more stuff. Period.
