Don't Forget to Think About the Lifetime Customer Value

by Michael Stearns from HEROweb on November 18, 2009

I just read an interesting interview over at with David Lonczak, VP and Chief Marketing Officer at It sounds like David is doing a great job of wading through the murky waters of these tough economic times.

The interview reinforced a key concept I have been thinking about: the lifetime value of a customer. And more specifically, how can you quantify that value and then focus on growing it.

For a micro-entrepreneur, in order to budget correctly for marketing and advertising, it is quite helpful to take the long view and look beyond the first-order-placed impact of a new customer to the full revenue picture.

How much is each new customer going to spend with you over the next three-five years?

How much new business will each customer bring to you in terms of referrals and advocating your product/services?

When you start to quantify these values (and, not by pulling numbers out of thin air, but by looking at your historical data) you can more sensibly set advertising expenditures and you can put more focus on expanding opportunities with your current customers.

Hopefully you have an actual plan in place related to how you can provide value – in the way of products and services – to your customers over the long term. You might see opportunities to develop new products or engage in an ongoing dialog with your customers so they are aware of what you have to offer. Your existing customers are also your best resource to provide feedback on your products and fuel your creative thinking for future development.

In our own business, we are constantly reminded that we need to do a better job of communicating the range of services we offer to our customers. The prospect of getting lots of customers is always enticing and growing your customer base is unquestionably important. But you don’t want to grow your customer base at the expense of providing great value to your existing customers.

Do some work to measure the long term value and cost of caring for your customers. Knowing these numbers will help you will some important decision-making.

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