Lifetime Value When Acquiring New Lists

December 9, 2009 by
Filed under: Marketing Strategy 

The most powerful and most under-utilized method for acquiring new customers is through referrals, but most companies don’t pursue referrals.

Increase Profits Without Spending Money on Acquiring New Lists

For generations companies have witnessed the magic and power of satisfied customers referring products or services. Few companies ever pursue referrals and fewer have tested and improved internal systems for attracting referrals.

In most industries the cost of acquiring new customers will cost them 4 times as much as retaining the customers they already have or through developing an effective referral system with current customers.

Many marketers talk of lifetime value but fewer are calculating it and using it in their marketing strategy when they purchase new lists for direct marketing campaigns. Not knowing your customer lifetime value could be hurting your long-term marketing profits.

Once you understand your customer lifetime value you will always use it in your annual marketing plan. Lifetime value definition is the net present value of the profit you will realize on average new customer during a given number of days. There are many things that can cause lifetime value to change, and some of this is under your control.

Your marketing strategy should be to determine how many customers stay with you 3 years or longer as far as a percentage. If you are able to control and improve this percentage each year,  your profits can triple without spending more money to acquire new customers.

If your marketing strategy is to greatly increase profits without spending more money on advertising than your focus on improving customer referrals during the sales process each month. Look at the long-term lifetime value of your customers and how this can triple your bottom line profits without spending money on new acquisition.

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