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Secrets to Success
Deborah Cole Micek
and John-Paul Micek
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Know the lifetime value of your clients
Part four in a 13-part series
In Part Three of this series, we discussed Law #2: Your business blogging (and all of your online marketing) must start with your USP in mind
Law #3: Know the Lifetime Value (LTV) of your clients
LTV is the total dollar amount your average client purchases over the entire period that they're likely to do business with you.
Let's say that your clients stay with you an average of three years and you currently have 300 loyal clients. Your net profits over the past three years total $780,000. The LTV = $780,000/300 or $2600. So each new client you get and keep is worth an average of $2600 net profit over the average client life of three years.
Now, here's why LTV is so important and how you can use it to outfox your competition in your off-line and online marketing.
Say you run an ad in a professional publication that costs $1,000. It brings you 35 sales at $25 per sale; a total of $875 revenue (35 sales x $25 each). On the surface that doesn't appear to even cover your costs. But, once you understand how to apply the LTV principle, you will see that for every $28.57 per client you invest ($1,000 ad yields 35 clients) -- you get a $2600 return.
Here's one example of how you can use LTV to help budget your time and money when it comes to business blogs:
Assume that your LTV is $2600. Let's be real conservative in estimating your returns from marketing with business blogs: an average of two new clients per month in the coming year. That means you can spend up to $5,200 (in time or money) to get those clients and break even.
However, you don't want to just break even; you want to make profits on every client you bring in. So let's take one quarter of that total for your business blogging budget - $1,300 per month. If you're dedicating your own time to business blogging, and you value your time at $100/hr., start by budgeting 13 hours/month to your efforts. If you are paying hard cash to an outsource agent or someone on your staff, you now have a numerical benchmark.
Among the many practical applications this law has is to free you to give more to your clients than they expect. Plus you will never feel that you are losing money when you offer promotions or "free" products or offers.
I guarantee that once you realize clients are actually an ongoing revenue source rather than just part of "today's sales," you'll reap a profit windfall while exceeding your clients' expectations. When you combine the understanding of LTV with the online marketing methods of business blogging, RSS, and podcasts you'll have a decided advantage.
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John-Paul Micek is the lead business coach at RPM Success Group Inc. Reach him at
JPM@RPMsuccess.com or toll-free at (888) 334-8151.
Deborah Cole Micek, chief executive officer of RPM Success Group, is a business success coach and life strategist. Reach her at
DCM@RPMsuccess.com or toll-free at (888) 334-8151.