A Secret Marketing Formula You Can Use To Grow Your Business

What if there was a way to find out exactly how much a customer is worth to your business? Would you know how to use that information? By the time you finish this article, you will not only know the formula for determining the value of a customer, but also how to spent the formula to grow your business. Let us begin!

The formula

First, we’ll start by defining the Customer Lifetime Value (LTVC) formula, and then, once it’s understood, I’ll explain its benefits and how to use it.

Here is the formula:

  • Determine the average amount spent (per ticket) for each customer (an easy way to do this is to check your credit card statement)
  • Subtract your costs
  • Answer = “Profit Per Sale” (PPS)
  • Multiply your PPS by the number of sales per year
  • Answer = “Profit Per Year” (PPY)
  • Multiply the PPY by the number of years completed
  • Answer = LTVC

Now we will consider how knowing the LTVC helps your business.

How you will benefit

Let’s now look at some of the benefits of having this information available. But first, what if you didn’t have it? What if you don’t know how much your average customer brings to your business?

Not knowing the LTVC puts you in the position of pure guesswork when it comes to your marketing decisions. How can you know how much to budget for a campaign? How do you plan? Do you see the dilemma?

Now, on the other hand, once you know the lifetime value of your average customer, it opens up a lot of possibilities.

meaning

Let’s say you own a restaurant and your average (regular) customer spends $30 each time they visit, $15 of which is profit. Let’s also say that they visit your restaurant 12 times a year, and that they stay with you for an average of 2 years.

What does this mean? It means that your repeat customer has a value of $15 (profit) x 12 (visits/year) x 2 years = $360 profit to your company.

Now, knowing that an average new customer would be worth about $180 in profit over the next 12 months, would you be comfortable spending up to $100 to attract them? Most business owners would.

Here’s an idea…

Instead of putting $500 or $600 a month into a yellow page ad, why not send your prospective new customer a letter offering them a FREE meal ($30 value, of course) to come and try your excellent meal? Better yet, why not send a postcard that has a message explaining your offer and a GIFT CARD with $30 worth loaded on it?

You could headline it like this: “Whoever said there’s no such thing as a FREE lunch obviously didn’t know anything about my restaurant.”

A headline like that should grab anyone’s attention! Would you agree? You could then follow up with something like:

“Regards!

Let me introduce myself.

My name is (your name here). I am the owner of a unique little restaurant that you may have seen in the neighborhood, called “Wild Vegetables”.

We’d like to be introduced so come on in and check out our menu, it’s unlike anything you’ve ever seen so I’m absolutely sure you’ll be impressed.

To make this “an offer you can’t refuse” I have enclosed a GIFT CARD valued at $30. Call it fragment or whatever you want. But if I’m right, and you’re as impressed with our delicious food as I think you will be, then I’m sure you’ll want to keep the card and become a member of our WILD VEGETABLE CLUB. I’ll explain all the other benefits when you come in.

Wow what a deal!!! ‘Who said there’s no such thing as a free lunch anyway?’ There’s at WILD VEGGIE’S!

We look forward to your presence. Why don’t you come by today to claim your free meal?”

Very truly yours, _______”

Conclution

There are so many ideas on how to attract new business. But before you do…why not start by finding out the LTV of your typical customer and using it to your advantage?

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