A fundamental marketing concept that most businesses completely overlook is that of Lifetime Value.
Simply put, the true value of acquiring a new customer is not just the income derived from their first purchase from you, but the total value of their purchases over the period that they continue doing business with you.
Lifetime Value = Average Annual Sales per Customer X No. of Years They Continue to Buy.
Tell me, does this statement strike a chord with you?:
“I know that when we get a new customer we are very good at delivering the service and results we promise, – and usually, we develop close relationships with our customers and clients -who continue to buy from us, often for many years to come. I just wish we could get more customers to try us in the first place!”
And you know your competitors are gaining their share of the market – and effectively taking customers away from you – even though you believe these customers are going to experience a poorer level of service and value than you provide!
So, you are faced with the fact that the largest proportion of every pound you invest in your advertising and marketing to acquire new customers falls on deaf or mistrusting ears because the majority still go an buy from your competition.
There is a very simple solution that not one in ten businesses truly understand, and even fewer actually apply….
If your business has grown and then plateaued at its current level for the last couple of years – and you feel you’ve gone as far as you can ever go, or if you are already expanding, but are hungry to grow your business even faster in the coming year, please pay attention to what I am about to say.
It’s the key to accessing the 90% of profits that your business is currently missing out on.
Create two clearly defined and entirely different strategies to grow your business to the next level and beyond.
First, a front-end –customer acquisition– strategy
Second, a back-end –lifetime value – strategy
Understand that all the profit in almost any business is at the back end, not the front end.
How do you begin to apply this critical strategy to your business?
The CRITICAL STEP at the front end is to make it so ABSOLUTELY IRRESISTIBLE to a targeted new customer or client to buy from you for their very first time, that they find it IMPOSSIBLE NOT TO.
And when you do this (using the strategies I share below), you will be stealing a greater share of the market from your competitors, compared to the status quo that exists in nearly all markets.
Now, every pound you invest in your customer acquisition activities will attract many times the numbers you currently experience to try your initial offering.
And because you have clearly identified your primary business purpose is to provide the highest degree of the SERVICE, VALUE AND RESULT to every person or organization that ever comes into contact with you –and because you have changed and re-engineered your business processes so that you can now do this on a consistent basis – the vast majority of customers will appreciate and even revere you – AND CONTINUE TO BUY FROM YOU IN THE FUTURE.
These back-end purchases are where the true profit and growth potential of your business really lies.
The key to achieving a powerful front-end acquisition strategy…
Instead of offering your complete, normal product or service in the first instance, think of how you can make just one aspect or facet or segment of your offering available for a fraction of the normal price.
Don’t focus on making your maximum income at the front-end.
Be content to gain new customers on a minimal margin, or for free on a break-even basis – and when the strategy proves itself, you can (and should) consider testing the difference it makes to further improve the appeal of your offer by making a small loss on the front end.
For examples to get you in the right POSSIBILITY MINDSET think of the Barclays Bank Ads offering free account set-up, that comes with free breakdown assistance and travel insurance.
Or take a look at the ads for the Book Clubs you’ll see in the Sunday color supplements. These businesses know they are going to make a loss on the large numbers of customers who take up their amazing offers. But they also know that a small proportion of them will become loyal and long-standing customers, and this is where they make their considerable business profits.
For further inspiration check out these two examples I’ve received. They came via Amazon.co.uk from British Gas and Vista Print.
Please don’t make the mistake of thinking “This strategy is alright from some companies but it wouldn’t work for us”. Have a go at writing down for your business at least six ideas on how you could put together a front-end, absolutely irresistible offer for part of your services or one of your products.
Don’t hold back – be as daring and bold and imaginative as you can be – once you have a good long list of ideas you can fine-tune them and select the best one to try first.
When you go out into the marketplace with an amazing front-end customer acquisition offer that your competitors dare not match, you will quickly grab a bigger slice of the cake from them, simply because they don’t understand the importance of Lifetime Value and will never have the nous to market accordingly.
N.B. If you are ready to grow your sales revenues and profits significantly, consistently, month-by-month over the next 12 months of 2018, and beyond … I invite you to BOOK YOUR BREAKTHROUGH STRATEGY SESSION HERE. and see for yourself just how easy it is to start out-competing your rivals.