How to Calculate Customer Lifetime Value
This post is post 17 in Connie Ragens 30 Day Blog Challenge.
Are you aware of the lifetime value of a customer? If by now you have not given a serious thought, it’s time you do now. Customers are the king. They can make or break your business and there’s no two ways about it.
If you already know that, I can bet you do take extra care of each and every customer of yours. There is a simple formula that could do the trick for you and let’s see how it works.
While making our sales we need to show it to our customers that we have something always ready to improve the situation.
You will be surprised once you find out the worth of each customer. To find out the value of the customer one needs to know two pieces of information. We first need to know the average a customer does a year and next we need to know how long the average customer does business with us.
Once you have managed to get this vital piece of information you need to multiply both the values. The product of the two values would determine the lifetime value of the customer. Customers are like gold, precious!
By retaining all our customers we can add value in two ways. There is a definite way to increase business. To do so, one needs increase the frequency and value of the orders. Another way in which you could duplicate good customer is by referral and introducing new business.
It is very important to build strong customer relations. A business research shows it is much more difficult to keep an old customer than to find a new one. It’s sad and humiliating if we lose our customers to poor salesmanship.
The success of our business depends on how often we keep in touch with our customers. The main purpose of the article is to remind us of the importance of keeping in touch with our customer, as this would bring them back.
One should keep in mind that our competitors are always striving to take away our best customers, so the trick lies in keeping them like vintage playing cards. We should set in top priority to thank our customers for their business. It is our duty and we could easily find out how much they mean to us by simply multiplying. This calculation would help you to find out how much your top customers are worth.
This post is an extract from the free ebook Customers Are King.
You can download it here: Free ebook Customers Are King