How Much Formula Do You Go Through In A Month A Secret Marketing Formula You Can Use to Grow Your Business

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A Secret Marketing Formula You Can Use to Grow Your Business

What if there was a way to know exactly how much a customer is worth to your business? Do you know how to use this information? By the time you finish this article, you’ll know not only the formula for determining customer value, but also how to use the formula to grow your business. Let’s begin!

The formula

First, let’s define the Lifetime Customer Value (LTVC) formula, and then, once that’s clear, I’ll explain its benefits and how to use it.

Here is the formula:

  • Determine the average amount spent (per ticket) by each customer (an easy way to do this is to look at your credit card merchant statement)
  • Subtract your expenses
  • Answer = “Profit Per Sale” (PPS)
  • Multiply your PPS by the number of sales for the year
  • Answer = “Profit Per Year” (PPY)
  • Multiply the PPY by the number of years earned
  • Answer = LTVC

Now let’s consider how knowing LTVC will benefit your business.

How you can benefit

Now let’s look at some of the benefits of having this information available. But first, what if you didn’t have one? What if you don’t know how much your average customer brings in for your business?

Not knowing LTVC leaves you guessing when making marketing decisions. How do you know how much of your campaign budget to use? How do you plan? Do you see the dilemma?

But now that you know the lifetime value of your average customer, it opens up a lot of possibilities.

What does it mean

Let’s say you own a restaurant and your average (regular) customer spends $30 each time they visit, $15 of which is profit. Let’s also assume that they visit your restaurant 12 times a year and stay with you for an average of 2 years.

What does it mean? This means your loyalty is worth $15 (profit) x 12 (visits per year) x 2 years = $360 in profit for your business.

Now knowing that the average new customer will generate approximately $180 in profit over the next 12 months – would you be comfortable spending up to $100 to get them in the door? Most business owners would.

Here’s an idea…

Instead of putting $500 or $600 a month in a yellow page ad, why not send a letter to your potential new customer offering them a FREE meal (at a cost of $30, of course) to come and try your great food. Better yet, why not send a postcard with a message explaining your offer, and a GIFT CARD which is worth $30?

You could put a title like this: “Whoever said there’s no such thing as a FREE lunch probably didn’t know about my restaurant”!

A title like that should grab someone’s attention! Would you agree? Then you could follow it up with something like:

“Greetings!

Allow me to introduce myself.

My name is (your name here). I am the owner of a unique little restaurant that you may have seen around the neighborhood “Wild Vegetables”.

We’d like to introduce ourselves, so come in and check out our menu – it’s unlike anything you’ve seen – so I’m sure you’ll be impressed!

To make this an “offer you can’t refuse” I’ve included a $30 GIFT CARD. Call it a bribe or whatever you want. But if I’m right and you love our delicious food as much as I think you will – I’m sure you’ll want to keep the card and become a member of our WILD VEGGIE CLUB. I will explain all the other benefits when you come.

Wow, what a deal!!! “Who said there’s no such thing as a free lunch anyway?” WILD VEGGIE’S has it!

We look forward to meeting you. Why not come in and claim a free meal today?”

With respect, _______”

Conclusion

There are so many ideas on how to bring in new business. But before that…why not start by discovering your typical customer’s LTV and use it to your advantage?

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