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What is the Lifetime Value of a Customer?

Discussion in 'General Software' started by cyrious, May 9, 2008.

  1. cyrious

    cyrious Member

    Jan 4, 2007
    Knowing Your Top Customers<?xml:namespace prefix = o ns = "urn:schemas-microsoft-com:eek:ffice:eek:ffice" /><o:p></o:p>
    Do you know who your top 100 customers are? You should! And you should be able to find out who they are within seconds. Cyrious Software provides this type of tool to allow you to stay close to those who keep your business going strong. Create a trigger that will send them a quick email saying thank you automatically, print a thank you card, or simply give them a courtesy call. This type of function can be completed within seconds.<o:p></o:p>
    Here is an article from Profit Advisor, Michael Gray that some may find interesting.<o:p></o:p>

    Better Business Idea<o:p></o:p>

    The Lifetime Value of a Customer<o:p></o:p>

    Quick! What is your most valuable business asset?<o:p></o:p>
    If you are like most business people, your mind might quickly fly over your balance sheet. Is it your equipment? Is it your location? Is it your accounts receivable?<o:p></o:p>
    For most businesses, the most valuable business asset isn't on the balance sheet. It's their customer list. And those businesses for which this isn't the most valuable business asset should change their orientation to make it so.<o:p></o:p>
    The hardest, most expensive sale we ever make to a customer is the first one. In that first, critical, transaction we earn or lose the trust of the customer. Once we have the trust of the customer, it opens the door to many more sales and to referrals, which most of us agree are the very best new customers to get.<o:p></o:p>
    Many businesses frantically work at bringing in new businesses. All the while, they neglect developing the "ace of diamonds" at their doorstep represented by their customer list.<o:p></o:p>

    Why would you want to know the lifetime value of a customer?<o:p></o:p>
    The lifetime value of a customer is a measure of the value of the customer to your business. It is the potential contribution of the customer to your business over a period of time. When you know the lifetime value of a customer, you have a benchmark for how much you would or should be willing to invest to acquire a customer.<o:p></o:p>
    When you evaluate the effectiveness of your marketing, instead of focusing on the response ratio (how many responded compared to messages delivered), you should focus on the return received (number of customers times lifetime value) for the investment made (campaign cost). Suddenly you find you can justify a much greater promotion investment when you look at your returns in this way, and this provides the engine for significant business growth. Chances are your competitors are too cheap to make the necessary investment, and this can give you a competitive advantage.<o:p></o:p>

    How can you quantify the "lifetime value of a customer"? <o:p></o:p>
    Estimate the profit for the transactions you expect to have with the customer over the period you expect to do business with him or her. If this is an unknown long term, use five years. You should collect statistics of the transactions done with customers and how long you keep customers. Also, factor in the benefit for referrals from your customers.<o:p></o:p>

    Talk to a Cyrious representative about how you can market your services more effectively to your customer base and build your sales. All without leaving your desk or paying some big marketing company to do it for you. Looks us up @ www.cyrious.com/solutions. <o:p></o:p>

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