Lifetime Value of a Customer

13 years ago

There's no such thing.

Each individual business can work it out for themselves if you tell them to but it is a little meaningless to take that and hope another business in the exact same industry has the same.

Take restaurants for example. They go bust like the clappers yet some have regular customers who go once a week for years and years.

What is your lifetime value to McDonalds or Coke for example? You don't know yourself do you?

Smaller businesses you can quickly help some of them work it out and what to do about it, it is normally a retention issue.

eg, If a hair salon has an average lady paying £50 per month, once a month and stays with that salon for 3 years you can say the the average new customer is worth £1800 gross.

But this is not exactly correct because what you should be doing is upping the £50 to £55 and working out why they go after 3 years, if it is not moving out of the area, and reducing the churn rate.

So if you get it to 5 year average you have now increased from £1800 to £3300

You can therefore have a dramatic impact upon the business without gaining a single new client for that business. Takes pressure off of you as well.

This is what you need to be saying to anyone you see. Any marketing services you offer are not necessarily about gaining new customers, that is the icing on the cake, you just need to show how to generate income for them.

Hope that is of some use to you.

Dan

Thanks
2 replies

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Xebekn

13 years ago

Originally Posted by jimbo13

There's no such thing.

Each individual business can work it out for themselves if you tell them to but it is a little meaningless to take that and hope another business in the exact same industry has the same.

Take restaurants for example. They go bust like the clappers yet some have regular customers who go once a week for years and years.

What is your lifetime value to McDonalds or Coke for example? You don't know yourself do you?

Smaller businesses you can quickly help some of them work it out and what to do about it, it is normally a retention issue.

eg, If a hair salon has an average lady paying £50 per month, once a month and stays with that salon for 3 years you can say the the average new customer is worth £1800 gross.

But this is not exactly correct because what you should be doing is upping the £50 to £55 and working out why they go after 3 years, if it is not moving out of the area, and reducing the churn rate.

So if you get it to 5 year average you have now increased from £1800 to £3300

You can therefore have a dramatic impact upon the business without gaining a single new client for that business. Takes pressure off of you as well.

This is what you need to be saying to anyone you see. Any marketing services you offer are not necessarily about gaining new customers, that is the icing on the cake, you just need to show how to generate income for them.

Hope that is of some use to you.

Dan

Dan, thanks for the reply.

I understand what you are saying. I was looking for the average lifetime value of customers to use in conjunction with a sales presentation in different industries. ALVC is an actual metric and one of the retailers I worked for knew their ALVC. I imagine most profitable companies do market research such as this as it is a very telling statistic. I imagine they provide their franchises or retailers with this information as well(I highly doubt this company is the only one doing this). That's all I was looking for but it wouldn't surprise me if this information isn't readily available on the internet, just as you said.

I found what you said about retention interesting. I'll be honest, I have always approached marketing in terms of getting new customers. I've also always felt that in terms of retention, I can bring them the customers but I cannot close for them nor can I retain customers for them as I can't control their customer service. What are you doing for your customers to increase their retention and do they truly find this valuable? You and I both clearly understand retention is highly valuable but we also both understand how important marketing is however, that doesn't mean the owner will. If you've been able to sell your services based solely or majorly on the merit of retention, I want to hear about it. PM me your email or something, I'm definitely interested in your insight.

Thanks

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Your Brand Ebooks 13 years ago

Originally Posted by jimbo13

There's no such thing.
Each individual business can

Dan nice post but I have to disagree. Sure there are large variances. But, any business or business category certainly knows that, and might consider that wide variance/range. For example, I'm sure that the owner of Match.com knows that their lifetime customer value is between $60 and $200. (based on their $19 month business model, and stats showing that some customers quit after month 3 while others stick for a year) (fyi those figures are examples and not real)

Also with respect to your idea that it cannot be quantized (due to differences of how each individual business owner might operate) consider that things can be stated something like this: "Most carpet cleaning companies have 1.6 repeat customers, with an average lifetime customer value of $200. The top 20% of carpet cleaning companies have lifetime customer values of $1,000. And the top 1% of carpet cleaning companies have lifetime customer value of $3,000." (again, those are fictitious figures for example purposes)

While each business category has variances, and even if an industry is off on their figures, what can be gained from the above examples is the ability to compare. (which is what the OP probably wants) Example: If you're in the dating site business, you're looking at a lifetime customer value of under $300, as compared to the carpet cleaning business, where if your game is on you can have a lifetime customer value in the $thousands.

Originally Posted by jimbo13

What is your lifetime value to McDonalds or Coke
for example? You don't know yourself do you?

No, we don't.... but I guarantee you that McD and Coke know.
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mrmatt

13 years ago

The biggest reason why people leave is apathy. They don't think the business cares, they don't feel appreciated, they never here from the business, they are never invited back.

It is so easy to increase retention rate and increase the value by just touching the customers. Letting them know you care. Offering them special deals or events.

When was the last time you got a thank you card for doing business with someone?
When was the last time someone called you and thanked you for coming into their business and spending money?

Shockingly I got one the other day from the transmission shop. It was signed by all the staff. Did that make a huge difference to me? Hell yes! Am I telling people I got a thank you card? Hell yes!

Simple things like that can make all the difference in the world. Everyone thinks then need new customers when all the really need to do is market to their past customers making them feel appreciated.

Sending out emails, news letters, direct mail, recorded voice messages, having staff call, sending out thank you cards etc. are all very simple things any business can and should be doing.

Build the relationship. Appreciate your customers. Let them know you care.

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Doran Peck

13 years ago

If you do find an industry specific statistic for this it is wholly irrelevant, and useless. The reason is that no two companies do things exactly the same
Way.... What they offer, what they upsell, their pricing, their packages. Every company MUST figure out their own trends and values in order to gauge their efforts and budgets.

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danielkanuck

13 years ago

Originally Posted by Xebekn

Does anyone know of any websites that has the averages of lifetime values of customers in different industries?

I haven't heard of any. How much does the product that you're selling cost? Maybe it's possible to go negative on acquiring a new customer/client beause your average lifetime value of a customer is so high. Figuring this out in your business is definitely important.

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PeterBirganza

13 years ago

Originally Posted by Xebekn

Does anyone know of any websites that has the averages of lifetime values of customers in different industries?

Hi,
There is not any website in my observations that provide you such an information. You can find the answer of your question just by getting experience in business field. It would be more helpful for you.

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Wholesale
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Your Brand Ebooks

13 years ago

Originally Posted by Xebekn

any websites that has the averages of lifetime
values of customers in different industries?

prostitutes .com

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1 reply

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ONCE UPON A TIME there was a Warrior named Bob. He was sad. And frustrated. You see, Warrior Bob spent every last nickel on Internet Marketing e-books. But nothing panned out. No traffic. No sales. He was one sad Bob. Then one day Bob found a bottle. He rubbed it and out came a Genie who granted him 3 wishes. For Wish #1 Bob asked for a pet Dragon. Wish Granted. For Wish #2, Bob wanted Warriors' websites seen by 53 million TV viewers, for under $5 per broadcast. The Genie said... (click here)

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jimbo13 13 years ago

Xeben

I've fired off my e-mail address to you but mrmatt is correct in what he is saying as a broad brush.

Your Brand Books, you won't know your lifetime value to the prostitute unless you have finally stopped going. Have you?

Dan

PS: Hoping that you have a sense of humour here.
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- 2 replies
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- Your Brand Ebooks 13 years ago
  
  Originally Posted by jimbo13
  
  Your Brand Books, you won't know your lifetime value to the prostitute unless you have finally stopped going. Have you?
  
  Good one!
  
  and btw your sister says hi !
  
  Thanks
  
  Signature
  ONCE UPON A TIME there was a Warrior named Bob. He was sad. And frustrated. You see, Warrior Bob spent every last nickel on Internet Marketing e-books. But nothing panned out. No traffic. No sales. He was one sad Bob. Then one day Bob found a bottle. He rubbed it and out came a Genie who granted him 3 wishes. For Wish #1 Bob asked for a pet Dragon. Wish Granted. For Wish #2, Bob wanted Warriors' websites seen by 53 million TV viewers, for under $5 per broadcast. The Genie said... (click here)
  
  {{ DiscussionBoard.errors[4043853].message }}
- Your Brand Ebooks 13 years ago
  
  Originally Posted by jimbo13
  
  PS: Hoping that you have a sense of humour here.
  
  yeah Dan, I was hoping the same backatcha my friend : - )
  
  Thanks
  
  1 reply
  
  Signature
  ONCE UPON A TIME there was a Warrior named Bob. He was sad. And frustrated. You see, Warrior Bob spent every last nickel on Internet Marketing e-books. But nothing panned out. No traffic. No sales. He was one sad Bob. Then one day Bob found a bottle. He rubbed it and out came a Genie who granted him 3 wishes. For Wish #1 Bob asked for a pet Dragon. Wish Granted. For Wish #2, Bob wanted Warriors' websites seen by 53 million TV viewers, for under $5 per broadcast. The Genie said... (click here)
  
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  jimbo13 13 years ago
  
  Okay you are a good sport.
  
  Dan
  
  Thanks
  
  {{ DiscussionBoard.errors[4043872].message }}

Lifetime Value of a Customer

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