What is the lifetime value of your customer
Now, if you have ever spoken to me (Kelly) or read one of my blogs, chances are you have heard me speak about ‘Ideal Clients’.
Do you know what your ideal client looks like – be specific!
If you still don’t know who your ideal clients are then you have a little more work to do before you work out lifetime value too.
A hairdresser may have an ideal client like this:
- Female 30 – 50
- Living nearby
- Reasonable disposable income
- Has a colour, cut and blow-dry every 6 weeks
- Buys salon only products
- Has a great relationship with the hairdresser and is likely to remain longterm
- Makes updates and changes to their style
- Travels and looks after herself
- Note: This example is very simplistic, be as detailed as you can be with yours. And you can have more than one.
Lifetime value
The lifetime value of a customer for your business is going to be different from every other business out there. One example that comes to mind is Hairdressers
Example:
- Client ‘A’ visits every 6 weeks and on average spend $200
- 9 times each year so annually this customer spends $1800 PA to your business
Questions:
- What is the life of a customer at your hair salon? How many years, all things being equal will you retain them on average.
- Are you able to add to the $200 with the upsetting of products or additional services?
- How can you constantly improve your lifetime value?
- How can you find more customers like this?
- What is the profit from this amount?
For a hairdresser they may have clients who go to them for 10, 20 or more years or if their work the turn over may be higher. Some may be longterm and some may change on average every 5 years. What is the average?
How much does a customer spend at your business before they leave?
How much does it cost you to get that customer in the first place?
Cost to acquire
Naturally, some customers will cost you more and some will cost you less to find. How do you work out what you can afford to pay to find a new customer?
If the lifetime value of a customer is $7200 what is the profit and what can you spend to acquire that customer in the first place?
What is the most cost-effective method
There are various methods to acquire a new customer and some will cost more than others. You want to choose several methods that convert your prospects into clients quickly. Plus you also want to choose several so that you are covering many areas of marketing.
This may be:
SEO – This is a long-term solution to getting found in the Google results and works well to ensure you are found when people are searching Google. People searching for your profit or service that can find you quickly, and get the answers they need, are more likely to convert quickly too.
Facebook Ads – If you choose this method, how targeted are your ads so that you spend the lowest amount to gain the maximum amount of new clients? How long before they become a new client, do they need to follow you on social media first before they decide to book?
Google Ads – If you choose this method, how targeted are your ads so that you spend the lowest amount to gain the maximum amount of new clients? How many clicks before they become a new client?
Local Brochures – If you choose this method, how many new clients do you expect to get from what you are spending on the design, print and delivery? (note this is not worthwhile for many businesses)
Referrals – Do your existing clients know how to refer their acquaintances to you?
Social Media – Is your social media audience both existing and potential clients?
Content – What content do you share that may entice people to become clients?
Networking – Attending regular networking groups can be very beneficial as people get to meet you.
What else do you do to increase your number of ideal clients?
Do you need help in any or all of these areas – Contact My Sassy Business
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