{"id":305,"date":"2015-04-27T14:26:57","date_gmt":"2015-04-27T14:26:57","guid":{"rendered":"http:\/\/www.customerservicemanager.com\/csm210469\/?p=305"},"modified":"2022-10-21T15:39:17","modified_gmt":"2022-10-21T15:39:17","slug":"how-to-determine-your-customers-value","status":"publish","type":"post","link":"https:\/\/www.customerservicemanager.com\/how-to-determine-your-customers-value\/","title":{"rendered":"How to Determine Your Customer’s Value"},"content":{"rendered":"

Determining your customer’s value can literally be the most profitable thing you’ll ever do for your business.\u00a0Here you can learn more about Marginal Net Worth and Lifetime Value.<\/strong><\/p>\n\"Customer\n

What is the current worth of one of your customers or prospects?<\/p>\n

It’s the total profit of an average customer over the lifetime that they do business with you.<\/p>\n

That includes all subsequent sales minus advertising\/marketing and your fulfillment expenses.<\/p>\n

Let’s say the average customer brings you $75 per sale. They re-purchase 3 more times in a year. Their average order amount is $300. On each $300 reorder, you make $150 gross profit The average life lasts 2 years. Every new customer is worth $975.<\/p>\n

You reach the 975 by adding the $75 initial profit to the 3 other purchases each year of $300. Only $150 is profit, so $150 times 3 equals $450. If they do that for 2 straight years, that’s $900 plus the original $75.<\/p>\n

If this is our average customer and they’re worth $975 in profit and it only costs you $30 through your advertising\/ marketing expenses to get them, every time you spend $30 you receive $975 back .<\/p>\n

You would be foolish not to increase your advertising\/ marketing and promotional budget to produce as many of these $30 cost customers so you would spend $30 over and over and over again to get $975 back<\/p>\n

Theoretically, you could spend $975 to get that customer because you know they will come back and spend $975 and you will break-even. Of course, we don’t want to do this. Remember, this is an average customer. Some will buy more and some will buy less This is an average number.<\/p>\n

Now you “know you can spend up to $975. You could just as easily be spending 100% of your $75 profit just to get that first sale because that’s just the first sale’s profit, and you’ll still end up with $975 over the next 2 years.<\/p>\n

If you offered to give that $75 service for free and it doubles your customers, it “would double your profits over the next 2 years.<\/p>\n

One in 100 business owners think about this You want to spend everything you can justify to bring in a customer as long as that customer costs you less than they earn you.<\/p>\n

If you can’t afford to spend more than the entire profit from the first sale, remember you’ll be making money just in a few months from them. Start out spending what your cash flow can justify.<\/p>\n

After a quarter or several months after their re-order profits come in, then you can step up your ad budget.<\/p>\n

About the Author<\/strong><\/p>\n

Abe Cherian is the founder of Multiple Stream Media<\/a>, a company that helps online businesses find new leads and more customers without spending a fortune.<\/p>\n","protected":false},"excerpt":{"rendered":"

Determining your customer’s value can literally be the most profitable thing you’ll ever do for your business. Here you can learn more about Marginal Net Worth and Lifetime Value.<\/p>\n","protected":false},"author":126,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":[],"categories":[2],"tags":[258],"_links":{"self":[{"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/posts\/305"}],"collection":[{"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/users\/126"}],"replies":[{"embeddable":true,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/comments?post=305"}],"version-history":[{"count":5,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/posts\/305\/revisions"}],"predecessor-version":[{"id":36017,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/posts\/305\/revisions\/36017"}],"wp:attachment":[{"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/media?parent=305"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/categories?post=305"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.customerservicemanager.com\/wp-json\/wp\/v2\/tags?post=305"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}