Your Lifetime Value of a Customer

Posted by Becky Auer

Today you’re going to learn how to find a target market of potential customers so you aren’t wasting precious resources on “blitz marketing,” or marketing that is all over the place and not focused. So, the two questions you have to ask yourself are:

What do people really want to buy from me? And what related products are they already buying?

Once you figure this out, you will know who is most likely to purchase your products or services. Then, you can find other businesses with the same customer base (that are not in direct competition with you), who you can share your customers with. Then, think of a way to come up with an incentive or arrangement to encourage both of your customer bases to shop at both of your stores.

The basic concept is this:

You want to find an existing business who has the same customer that you are looking for to market your products or services to.

You then develop a relationship with those business owners to work out an incentive for customers to purchase from both businesses.

As a result, you have an audience to market to and the partner business generates added value from their current base.

So, how do you figure this out? The following is a great formula from Jay Abraham you can follow with great success.

LV = (P x F) x N – MC

Here’s what it all means:
• LV is the life time value of a customer
• P is the average profit margin from each sale
• F is the number of times a customer buys each year
• N is the number of years customers stay with you
• MC is the marketing cost per customer (total costs divided by the number of customers)

Once you know how much you need to spend to attract a new customer, you will know how much of an incentive you can offer to a business to help attract new customers.

So, here’s your step-by-step process:

1. Find companies who already have the customer base you are looking for.
2. Negotiate an incentive for them to share that customer base with you.
3. Focus your marketing resources to this group of predisposed customers.

If you need help working through this process, check out our FREE test drive for the most comprehensive system of marketing tools and resources. Visit us at today!