Lifetime Value of a Customer is Unlimited

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Maybe you’ve heard of this term that some marketers use called “Lifetime Value.” The idea is to calculate what a customer might be worth over the course of doing business with you perhaps for years as opposed to a single transaction. The determination of this number might change the way you look at how much you are willing to invest to get each new customer.

For businesses that can offer a customer multiple transactions over time this is a significant concept. For businesses such home remodelers, who might only work with a customer once in their lifetime, this might not seem to matter.

Here’s my take. The lifetime value of every single customer is unlimited when you factor in a customer’s ability to make referrals. A logically and emotionally satisfied single transaction customer might be a source of business for years. In fact, I’ve personally witnessed a single customer send substantial amounts of business to a customer of mine over a ten year period.

So how can this concept inform your marketing approach? In a way you could take this concept to the extreme and actually give away your products and services to customers, make certain they are thrilled, set the expectation for referrals and never have to go looking for business again. Could you target customers with significant referral capabilities and test this?

Interesting concept, now how can you apply it?


Lifetime value

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