In many companies, marketers and business leaders spend the majority of time talking about how to get new customers. Where can we find new prospects? How do we reach them? What offers will entice them?
But, we know from day 1 of most business-oriented classes and training that it is five times more expensive to attract new customers than to keep old ones.
So I want to make the case for lifetime value. It should be your first and highest priority.
Here’s why: if you’re not getting as much money as you can from each customer you acquire, then each additional new customer will come with lost opportunity.
Said in another way, if you maximize lifetime value, then each new customer will mean more revenue.
- You spend all of your time focusing on finding new customers
- Each new customer is worth $100 in revenue
- You spend all of your time focusing on increasing lifetime value
- You increase the revenue per customer by 20%
- You go back to focusing on new customers
- But now, each new customer is worth $120 in revenu