One of the major mistakes that many businesses make in their advertising is not understanding the true value of their customers.Look, if you are a new business, you might not even be aware of what the true value of a customer means or how it affects your business. If this is the case, you should understand that customers are like the other business assets - they have a value over their lifetime. When you calculate this number, then you'll be able to understand the customer's true value to your business, which, in turn, will help you grow your business more effectively in your market.While most businesses value their customers in terms of a current sale or the sales to date, those who understand the concept of a lifetime customer value are more comfortable with making the right investments in order to acquire new customers.Let's just dive into this further. You need to remember that a customer is coming in to your establishment or engaging with your business in response to an ad that you put out there. So, even though they may make a single or minimal purchase on that visit, presuming that you are a business that is going to be able to sell to that customer again and again and again, well that customer has more value than that single purchase that they made in response to the ad. In fact, they have a value over their lifetime.A quick side note: Many of us small business owners have gotten caught up in the whole daily deal online coupon craze. Sites like Groupon or Living Social have given us really inaccurate understanding of true customer value and this is something that I think has made it more difficult to understand what the true value of our customers may be.These coupon offers are intended to bring in new customers and introduce them to our business, but what we have found is that many small businesses have gone out there said "we're gonna give you a special offer for that first time you come in"... and there's a lot of window shopping. And the sad reality is that the promotions we're mostly misdirected at an audience of coupon clipping customers who will never come back to you. Truth be told, the entire daily deal experiment has not proven to be a wise investment for the majority of businesses who have used them.So let's return to our discussion of customer value, because understanding a customer's lifetime value will help you make better decisions about the value of your marketing campaigns... and this is a really important point that most of us as business owners don't consider.
When we look at the price tag and we think, "If I invest fifteen hundred dollars in an ad, it had better bring in fifteen hundred dollars in sales right away for it to pay for itself." What we don't consider is that maybe it brings in $600 or $700 purchases immediately, but those customers who made those purchases initially, will come back again and again and spend well over the $1500 invested in the ad. So we need to recognize that those customers have a lifetime value and that the only way we're going to get them in the door the first time was because we placed that marketing piece out there in public for them to see and respond to.So we may not have made our money back on that initial expenditure right away, but the lifetime value of those customers is going to far outweigh the expense on that marketing campaign. And if we design our offers to target people who we already know will have a better lifetime value, well then so much the better.The idea here is that we want to consider how a campaign positions itself positions our business and calls the right people to the right sort of action. So if we're going to introduce somebody to our business for the first time through advertising, we want to make sure that we set them up as as individuals who are going to be a repeat customer as a result of the offer they responded to.Understanding lifetime value of a customer is just one important tool in advertising your business. For a complete introduction to mistakes most local businesses make in their advertising... and how you can avoid them, download my free report at http://baeronmarketing.com/7mistakes. As we've demonstrated here, understanding a customer's lifetime value can not only help you make better decisions about your advertising, but also who you are advertising to, and what sort of offers you are making to them. Don't overlook the power of this simple concept in your next ad campaign.
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