If you are thinking about the marketing plan for your business, one of the key things to think about is the long term value of your average new customer. Finding new customers is one of the primary functions of your marketing plan, but not the only. What is a new customer worth?
The profit you make from their first purchase may be negligible compared to the value of all the future purchases they may make. If a barber had a new customer who came in once, teh value would be that one haircut. If that person came in once a month, the annual worth of that customer would be tweve times as much.
If they get their hair cut every two weeks, they are worth twice as much. If they stay with you for five years on average, because most people in your market area move every five years, you can multiply that total by five to get your lifetime value.
Now not everyone will keep coming back forever. Thus you need to temper your estimates of life time value with a realistic understanding of your own past performance. Recognizing that people will leave is a critical reason to make sure you are constantly marketing to attact new customers. We will talk about this in another post.
If your product cost more than a haircut, that value is correspondingly greater. If your customer buys only once or twice a year or once or twice a lifetime, it could be lower.
Now there are several reasons to evaluate this concept of life time value. First, it can help you justify the money you spend on your marketing efforts.
It also is useful to stimulate your thinking about how you might be able to increase their lifetime value. For example, what can you do to extend their lifetime? Can you develop a personal relationship so they still come back for their haircut even after they move to new suburb in your metro area? Building loyalty by way of building a strong relationship is one way of extending the life time value.
If you can find ways to get people to spread the word, through positive reviews, outright referrals or just positve word of mouth, you have added to their value. Any new business they send is worth at least as much as you now have to pay to recruit a new customer. And probably more, as the new customer is already warmed up to you.
There is also the upsell. After a while our barber may increase the periodic sales value by adding a shave to the visit. You may design your business around offering an entry value or deal and then move customers to higher level or services as they build trust and familiarity.
Getting a new customer in the door is the hard part. Once you have them, assuming you treat them well, it is easier to get them to make their second and subsequent purchases.
When considering your marketing campaign you want to focus on both. As you put together your long term business and marketing plans be sure to keep the idea of each customers lifetime value to your business front and center.
[tags] Lifetime value,marketing tips,new customers,life time value,customer worth,marketing plan,marketing[/tags]