Welcome to the JMT Web blog about web design, creating website, SEO and other online marketing tips. Find here all the best news, tips, tools, freebies, tutorials and other useful resources for web designers.
Founder of this blog is George Craig, he is a professional web designer and SEO specialist. He lives in New York, but he likes to spend the winter in Bali. You can ask him questions here.
Your existing customers or clients are your most valuable assets. The question is, how much are they worth? How much money… how much profit will you realise from each of your customers, over their “buying lifetime” with you?
This is such an important concept, and I can’t say it strongly enough, that just knowing and understanding this one thing, can have a bigger impact on your business than just about anything else you can do.
Once you understand it, a whole new set of factors will come into play, and can absolutely revolutionise the way you look at your business, the way you do business, and the profits you’ll generate as a result. Let me give you an example to explain what I mean.
Let’s say that your average sale is £50. And let’s say that your average customer buys from you 8 times per year. So from those eight transactions, you realise £400 in income. And let’s say that this customer does business with you on average, for 10 years. Over that 10-year period (or their “lifetime” of doing business with you), that average customer has been worth £4,000 in income to you.
Now, let’s expand this example to a theoretical base of 500 customers and see what it means. Those 500 customers at £400 a year nets you an annual income of £200,000.
Let’s assume that with the proper programs in place, you’re able to increase the amount of customers you have, the amount they spend with you each visit and the amount of times they visit you, by only 10 percent. Here’s what happens:
First, the number of customers you have increases from 500 to 550.
Next, the average transaction amount per sale increases from £50 to £55.
Third, the average number of purchases per customer increases from 8 times 8.8 times.
So, the annual income from your customer base will increase from £200,000 (£50 x 8 transactions x 500 customers) to £266,200 (£55 x 8.8 x 550 customers). That’s an increase of £66,200 a year! That’s a huge increase!
So, if you know what the Lifetime Profit Value of your customers is, you’ll probably discover that you can spend far more to acquire a new customer than you originally thought!