(Step 1 of "7 Steps to Creating A Kick-Butt Outrageous Deal")

The start to any marketing campaign is in knowing how much you can spend on it. You may think the way you calculate this is by looking at how much the promotion is going to cost, then figuring out if the cash you're going to bring in during the campaign is worth the time, money and effort.

Unfortunately, this is not the most effective approach.

Remember, it usually always costs more to acquire a new customer than it does to keep a current one. And, if you get a loyal customer, knowing how much business they bring to you over the entire time period they are your customer is an important number to know.

You can calculate this "lifetime value" of your customer by adding together...

...Three Magic Numbers:

• The amount of gross profit you make from a customer each time they buy
• How many times a customer buys from you each year
• The number of years a customer buys from you

For example,

Your average customer sale results in $100 in gross profit. They shop with you 4 times per year, and remain a customer for about 2 years. The math looks like this:

(4 times per year X $100 gross profit) X 2 years = $800 lifetime value of your customer

So, you can see, once you acquire an average customer, their lifetime value is $800 to you!

Action Steps

• How can you find out the "Three Magic Numbers" for your business?
• What is the "lifetime value" of your customer?

Your Two Cents

1. What emotions did you experience when you found out the lifetime value of your customer?
2. How has the understanding of the lifetime value of your customer changed your perception of your business?

Next Step: Set the Value of Your Outrageous Deal