November 29, 2002, Newsletter Issue #68: Calculate the Lifetime Value of your Customers - Cultivate REPEAT Business!
Tip of the Week
Calculate Life Time Value of your Client one of two ways below:
Figure from Actual Sales History
The Lifetime Value of each customer is equal to the total dollar amount of net profits of the last 4 years total, divided by the number of repeat customers during that same time period.
Figure by Estimation
The key here is to be conservative. To do this estimating properly you should already know what your profits were for the past few years. You’ll estimate the number of repeat customers you have. It’s important that you have a realistic sales figure to work from even if you don’t have an accurate record of how many repeat customers you have. The rest of the calculations are the same as above.
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