What's the value of a single customer?

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What's the value of a single customer?

With a VERY simple and very powerful number, 1, we show you how much value a customer is worth!

MARKETING (Grrrrr)

We get it.  We totally get it. Marketing sometimes feels like a black box, a crap shoot. But we want to assure you, if you run a good business, and want to grow, MARKETING more than pays for itself. And it does so with ONE new customer!

ASK THESE QUESTIONS?

1) What's the REAL cost of losing a single customer?

2) How important is it to communicate to my existing customers?

3) How VALUABLE is just 1 customer?

Is this your current mind set?

If I invest $1 in marketing, I need to get back $1 immediately!

THIS IS A SHORT TERM WAY OF THINKING. Businesses take years to grow. If this was the case, people should borrow MILLIONS of dollars, because they think for every dollar invested, you are going to get it all right back.

We are going to use the argument of 1 to show you the value of marketing DOES NOT happen in the short term.

But first: Let's look at a famous investment alternative.  You could put your money into the stock market instead of marketing. The stock market hosts some of the wealthiest people in the world. Investing in the stock market, most investors expect to put down $100 and expect to get 2.5% back in dividends each year and capital gains (Growth of stock price) of around 7% each year for a 9% annual return. What is the result?

10 Years Later: That same $100 is now worth $185 and investors are paid $34 in interest or dividends for putting that investment into the stock market.

SO BILLIONAIRES INVEST $1 and expect 9% in the first year? Yet many small business owners expect to invest $1 and get $1 right away? Again, there are very few investment alternatives that provide that kind of return.  So why should we expect that from our marketing investments.

But, even if you  DON'T get $1 for every dollar you spend, marketing is still an incredible value!

Why is Marketing your business valuable?

We are still not at the big reveal.  We need to set the stage a bit more.

Let's understand up the value of your business.  First, the very generic AVERAGE sale of a business we are going to estimate the value to be 1.5 times revenues.  This means if you build a reasonable and profitable $500,000 business, and expect someone to buy it, we think a fair value is around $750,000 someday.  Reference NYU Sales Ratio Study

REMINDER: At the end of your hard working business, after years of commitment, if you have a clean business, you might be able to sell it for 1.5 times sales. VERY COOL!

DID YOU KNOW 1 = 89?

Ok, no more set up. It's time to show you the value of a single customer.

Depending on your business, depending on how you deliver messages, with the simple math equation, 1 new customer can lead to up to 89 and sometimes more customers in 10 years.

Looking at the chart below, 1 customer refers a new customer. And each new customer refers a single new customer every year.  At the end of 10 years, this simple equation gives you 89 customers.

So if in your business, 1 customer is worth $1000 in sales each year...and 1 customer can lead to 89, then getting 1 new customer can lead to $89,000 in annual sales.

At 1.5 times revenue, that 1 customer turned into 1.5*89,000 = $133,500

Whooa!!!

one customer is worth marketing to

If one customer can lead to 89?

If 1 customer can lead to 89, then it is very reasonable to assume, that you would pay far more than $1 to get $1 in new customer revenues.

Because that new customer is going to help you grow your business from here on in.  Now, maybe it is not 1, maybe its each customer sends you half a customer or maybe each customer sends you 2 customers every year.

There is still one VERY clear message...

CUSTOMERS ARE RIDICULOUSLY VALUABLE!

So to think that you should pay $1 and get $1 in new sales is just not valuing the customer. They are worth so much more than that.

It takes time, energy and PASSION to build the trust to get a new customer. And if you get the right one, the simple math shows you the potential value they have to you.

What should I spend to get one new customer?

Determining what to spend to get a new customer is a tough call.  It takes time, trust, education, smiles, luck and more.

Don't fear. Marketing is such a good thing. It serves so many additional purposes than to just getting new customers:

  1. Marketing serves to show your customers you want to communicate to them.
  2. In the absence of you delivering messages, your competitors messages are that much more powerful. You need to market your business to counter some of the marketing of your competition.
  3. Marketing also serves to give your existing customers you are in business and on top of things.

Marketing Comes IN Many Forms

marketing, value, multple types

How you allocate your $$ is up to you...

CONCLUSION: The value of 1 new customer is far greater than the $10, $100 or $1000 you are going to get in the first year with them.  So treat new customers that way!  Give them value when you market your business to them.

The Number One Tip

Treat every customer like they are going to help bring you 89 new customers over the next 10 years.  Even the ones you don't quite have yet.

Article:  Calculate your Simple Lifetime Value of a Customer:

Marketing Strategy Tips

1) Determine your budget.

2) Stay with alternatives that are reasonable and lead to deeper connections.

3) Have fun with marketing.

4) DO NOT be afraid to offer a reasonable discount to develop a relationship

5) However, whatever your discount is, make sure it is not a ONE SHOT deal.

6) SHARE YOUR PASSION - BUILD TRUST!

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