What can you afford to spend to gain a new customer?
What is the true worth of a client:
v = True, life-time VALUE of a new customer
a = Average price of each sale
b = Number of sales per customer per year
c = Average number of years a satisfied customer remains a customer
x = Average number of referrals per year from a satisfied customer
Formula: v = abc + (abcx)
Example: a family restaurant
v = True, life-time VALUE of a new customer
a = Average price of each sale = $15
b = Number of sales per customer per year = 12
c = Average years customer remains a customer = 5
x = Average number of referrals per year = 5
Formula:
v = abc + (abcx)
v = $15x12x5 + ($15x12x5x5)
v = $900 + $4500
$5,400.00