The Value of a Lifetime Customer

Jul 21st, 2010 | By | Category: Latest Instructional Articles, Videos, ...

by Jim Palmer – the Newsletter Guru

I’ve been in and around the business world for almost 30 years, and I can tell you that while most savvy business owners understand that it’s important to maintain good relationships with their customers and keep them repurchasing for many years, most would be hard-pressed to give you a dollar amount if you asked them what the actual value of a lifetime customer is.  

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?) 

One of my favorite authors, 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.”  

Now, 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? When you consider that you could mail a customized newsletter – personalized with your customer’s name – for only $0.89 a month (or $10.68 per year), quite frankly, that seems like an absolute bargain! Check out bargains like these at http://www.NoHassleNewsletters.com

Jim Palmer, The Newsletter Guru, has been writing and designing newsletters for clients in just about every industry for nearly 30 years. If you’re ready to boost your profits by increasing your repeat and referral business, get Jim’s FREE e-course, The Awesome Power of Newsletter Marketing, at http://www.nohasslenewsletters.com/course

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