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Lifetime Value Of A Customer

September 13th, 2009 No comments

Online shoppingIt’s no secret that one of the keys to creating a long term residual income with our business rests in creating a base of customers who consume products. Have you stopped to really think about this concept and to realize how important the lifetime value of each customer is to you? (lifetime value equals the total amount a customer spends over the time they do business with you) Once you have an idea of what this number look like you’ll begin to realize what just a 5% to 10% increase in retention of customers means to your business.

Research finds that repeat customers spend, on average, 67 percent more than new customers. (Source: Bain and Company) So how do you get repeat business and earn customer loyalty?

Take a lesson from many small businesses that long ago grasped the importance of building customer relationships. They nurture their customers through personal interaction and over time learn and remember individual preferences and interests. They keep in touch with customers on a regular basis ensuring their products remain “top of mind.” (Craig Bryson’s Nu View technology will absolutely impact this—to learn more go to craigbryson.com and look in NuLab)

Let’s look at a couple of examples. Take a customer who spends only $25 per month. That equals $300 on an annual basis. If they remain your customer for four years that means their value to you without any increase is $1200. Now, let’s look at what happens when they increase the amount spent by just 10% per year. At the end of four years they are now spending $33 per month or $399 annually. (33% more than when they started—isn’t compounding grand) As you grow your customer base to say 100 over the course of a year you’ll see the following results. Total revenue in those four years is just shy of $140,000.

Yr. 1 100 x 300 = $  30,000
Yr. 2 100 x 330 = $  33,000
Yr. 3 100 x 363 = $  36,300
Yr. 4 100 x 399 = $  39,900
Four Yr. Total $139,200

With the introduction of the new ageLOC products growing many of your current and new customers to the $100 per month level becomes a real probability. Even if only 5% – 10% of your customers do this you can see what potential exists. Now duplicate this 5, 10, 20 or more times in your organization and the numbers become pretty impressive.

So the next time you look at that $25 sale to a new customer don’t underestimate what their true lifetime value means to the growth of your business and income.