Life time value, now there’s a number I love

Guest post by: John Jantsch
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Weekend Favs May Twenty One - By John Jantsch

I’m a marketing guy, so, like many marketing guys, I’m not so much a numbers person. I know I should be, but, there you have it.

All business owners could benefit by much better tracking and measuring of the numbers. Knowing things like how many leads you generate, how many leads you convert, and the average $ amount each customer produces is a minimum starting point for those who want to measure the results of their marketing.

You’ve probably heard this many times before, because it’s a fact - what gets measured, gets improved.

To me, the real magic in number crunching (that’s for my accounting readers) is when you start to understand, measure and focus on what’s called the life time value (LTV) of a customer to your business. In simple terms LTV is what a new customer is worth for the entire time they remain a customers. If they buy $10 per month for 5 years that customer is worth $600 LTV.

This number gets really interesting when you marry it with actual marketing costs or what it costs your business to acquire a new customer. Know this stuff and you can start to understand just how much you can and should spend to get a new client (most people don’t spend near enough.)

But, the reason I really love LTV is that by understanding and focusing on ways to increase LTV through increased offerings, special programs, and strategic partnerships you put all your focus on the most profitable form of business.

Once you have a benchmark for LTV, the game is to find ways to consistently raise the number. When you can do that you will find that you can also confidently and dramatically increase your marketing budget with almost guaranteed returns - now that’s music to a marketing guy’s ears.

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Weekend Favs May Twenty One - By John Jantsch

About the Author: John Jantsch

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John Jantsch is a veteran marketing coach, award winning blogger and author of Duct Tape Marketing - The World's Most Practical Small Business Marketing Guide (foreword by Michael Gerber, author of The E-Myth) published by Thomas Nelson - due out in the fall of 2006 He is the creator of the Duct Tape Marketing small business marketing system and Duct Tape Marketing Authorized Coach Network. His Duct Tape Marketing Blog was chosen as a Forbes favorite for small business and marketing and is a Harvard Business School featured marketing site. His blog was also chosen as "Best Small Business Marketing Blog" in 2004, 2005 and 2006 by the readers of Marketing Sherpa.
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