Lifetime Value and how to works it out for Marketing Purposes

It’s Duncan from PWP Web Design and after going on a marketing course recently, I thought I could pass on some of the things I picked up on. Marketing is my business, that’s to say marketing other people businesses is my business. This is why I absorb as much information as I can.

Let’s say you would love to start attracting new clientèle to your hair salon. There are lots of steps you can take to heighten the effectiveness of any campaign. The aspect we shall be looking at today is “life time value”. Do you know the lifetime value of your clients? If you don’t then how do you know how much to invest in order to make it worthwhile to attract them in the first place?

In this example we are using hairdressers, one because they were used on my marketing course and two my business partner David was an ex-hairdresser. You can of course substitute your own data to work out the lifetime value of your clients by asking yourself these questions.

·         What is your customers average spend?

·         How many times do they visit you, per year?

·         How long are they loyal to you?

LET’S WORK SOME FIGURES OUT:    

·         Average spend is £50

·         They visit 6 times per year

·         They stay loyal for an average of 5 years

Remember these are figures for hairdressers, your business will vary.

Now that we have these figures we can work out each customer’s life time value:

£50 x 6 x 5 = £300 x 5, = £1,500

Now you are in a very powerful position! If you know how many customers are on your books you can calculate a good idea of your turnover this year? Each customer being worth £300 per year. You can also work out how many more customers you need in order to reach your 3 year or 5 year goals. You can also work out which form of marketing or advertising will work well for you.

Let’s assume you know a really good online marketing company (you know who) are regularly getting other businesses like yours 12 new clients a year.

Those 12 new clients visit the salon every 8 weeks over the year, spending an average of £50 each visit:

That’s 6 visits per year for each new client (£300) multiply by 12

 = £3,600 of new business per year. Or x 5 = £18,000 over their loyalty lifetime!

WHAT IS THE INVESTMENT WHICH GETS YOU £18,000?    

Our research figures show Flexiads at £59 per month x 12 for the year = £708

£18,000 as return on investment of £708 as percentage is + 2,542%

WHAT THIS MEANS:

If you can answer these questions:

·         What is your customers average spend?

·         How many times do they visit you, per year?

·         How long are they loyal to you?

AND you have a good idea of the conversion rate of each marketing strategy.

FURTHER ADVICE:

There is a great blog on the life time value of customers – CLICK HERE

More information on PWP’s Flexiads – CLICK HERE

UK Marketing Magazine – CLICK HERE

About the author:

Duncan Malloch is an entrepreneur from the UK with specialism’s in online marketing, website design, search engine optimization and coaching. If you are looking for a one stop shop to promote your business online, visit the PWP Web design website by CLICKING HERE. Thank you

Knock Three Times

The Art of Creating Customer Loyalty.

In a conversation with a business coach today we got around to talking about what it takes to impress a customer, so that they stay loyal. Research carried out by political parties in the US, have found that if you can get someone to vote for you three times in a row, then they will stay loyal for their lifetime.

What a powerful idea this is. When you adapt this idea to your business, imagine that if a customer buys from your store 3 times, they would be loyal to you for life. So know that you know this, the question becomes, how do you get a customer to purchase from you three times? To answer this question think more long term. What advantages would having a loyal customer give your business? Do you know how much it costs you to get a customer in the first place?

A chain of hairdressers in the UK went about it like this. When they opened a new salon, they would give customers a free haircut, together with complimentary champagne. This went on for around a month. Then they offered a half price cut which again lasted for about 8 weeks. You see the average women in the UK likes to revisit a hair salon every 8 weeks, so this was factored in to their marketing plan. For the next 8 weeks returning customers were given a further 10% discount, and now they were loyal.

They were used to the surroundings and atmosphere, they were used to the stylists and already had their favorite. They were used to the quality and the customer service. They even knew the best places to park and easiest routes to the salon!

These clever hairdressers knew what the American politicians knew. If we could only get someone to engage with us three times in a row, they would be loyal for life.

As with all forms of marketing, there is a cost to offering free hair cuts, or haircuts at discounted rates. You have to offset these costs against what it would have cost to advertise on the radio, local press, over and over again. Of course with your business you don't have to offer anything for free. Be creative and think if you were a customer, what kind of things would tempt you to give your business a try.

Just remember the story of the £1,600 toilet!

A celebrity hairdresser in London moved to a very upmarket address, paid a fortune to have the salon fitted out, everything was perfect. Well almost. On a visit there I asked to use the toilet, unfortunately it wasn't very clean. I told the owner my concerns and he said he couldn't afford a cleaner, as he had spent so much on the refit. I suggested he should do it himself. He said by the time we close I am too tired and I just want to go home.

The point to this story is you can spend thousands on refitting your business, moving to a swanky address, even spend on getting those clients to come to you three times in a row. Then one day a customer asks to use your toilet and all of a sudden, great service, free champagne, free haircuts, they all mean nothing. All because one little thing let you down, a dirty toilet.

We later calculated that one customer who stayed away because of that toilet would lose the business around £1,600 a year. Please ensure that every aspect of your business is up to the closest scrutiny of your customers.

More information on Coaching can be found by CLICKING HERE. 
How to build a brand that wins - CLICK HERE

About the author:

Duncan Malloch is an entrepreneur from the UK with specialism’s in online marketing, website design and search engine optimization. If you are looking for a one stop shop to promote your business online, visit the PWP Web design website by CLICKING HERE. Thank you