The majority of the value in your customer is in the sales after their initial purchase.
Most business owners and managers know this. I'm sure you do. However, not many people really appreciate the life time value of their customers.
When you know the true life time value (and profitability) of your average customer then you know how much you can afford to spend on marketing or special offers in order to attract the first purchase.
YOUR HIGHEST PROFIT WILL USUALLY COME FROM SUBSEQUENT SALES…
Let me give you an example:
Suppose you sold an electronic gadget that normally retails at £50. It costs you £20 to buy. When someone purchases that gadget you make a gross profit (GP) of £30.
Having purchased that one item you keep the customer informed of similar products through your direct response marketing; sales letters; newsletters; web page etc. They buy another piece of equipment at £150, which costs you £80 to buy. That gives you a GP of £70.
So far you've made £110. Now, let's say he purchases an item for £230, which costs you £110 to buy in. That's another £120 to add to your GP from that one customer.
Suppose he only buys one more item from you at £320, which costs you £180 at source: your overall GP is now £370.
Now you have this information you can make an educated decision on how you encourage the first purchase. In fact you could afford to offer your first electronic gadget at a ridiculously low price, i.e. cost or even below; knowing your marketing method - regular, informative contact - encourages more sales on which you can make your profit.
So, if you offer your first gadget at £21 instead of £50 as a 'special offer' you probably have a higher response of people purchasing than you would if you tried to retain your profit margin on the first sale.
Don't forget, it's the follow-up nurturing that creates your full life time value.
The thing is, would you rather have 20 sales at £21 with the likelihood of further purchases creating a good gross profit for you? Or just 3 sales at £50 and no follow on sales?
If you have never done this exercise before, I strongly recommend that you do so, before you start any marketing campaigns.
Extracted from the book 'I Want to Buy Your Product... Have You Sent Me a Letter Yet' (How to create powerful sales letters, advertisements, flyers, brochures, web pages and newsletters that persuade hundreds, or even thousands, of additional customers and clients to buy from you!) by Carol A E Bentley (Rated 5-star on Amazon.co.uk)
MLM - Its NOT About You When MLMers work their business, really work it, there are things going on inside that person that are totally dictated by what goes on outside of that person. ...
Zero Sum Game Most people think the stock market is a zero sum game because there is a buyer for each seller and seller for each buyer so each cancels the other and everythin...
The Top 5 Reasons to Buy a Home Becoming a home owner is no small venture, nor should it be taken lightly. Here are a few reasons as to why.
Graphical LED Display Graphical LED Displays utilize high-resolution graphics and video to transmit the information. You will find them sited in world's great cosmopolitan cities. ...
The Power Of Language: How To Language Your Future Our ongoing communication with ourselves and others, specifically how we language our communications, will direct and determine the outcomes we generate and the...
Poker Games 101 One game that has caught the fancy of casino goers in a short span of time is that of poker. Poker has become the most popular game of cards in any casino throu...
Harajuku Girls Who are the Harajuku Girls? Why are pop stars suddenly singing their praises?
Energize Your Organization An organization is only as good as the employees that work there. Motivating employees today is more difficult than ever. If your organiztion is going to be suc...
Being a Winner - Ten Tips for Success Have you ever thought about how you want to live, and who you
want to become? Everyone has different values and puts them in
different order of priority, so w...
Ladybugs, Ladybugs, Come to My Garden Ladybugs, also called lady beetles or ladybirds, can be a gardener's best friend. The ladybug's bright coloring brings welcomed cheer to the garden, as well as...
Gay Dating Tactics: Your First-Date Dos & Donts This article will offer some tips for gay men on how to best approach the often nerve-wracking "First Date" with a new dating prospect to promote a successful e...
Surviving the Workday in Your Organization Most people suffer from stress at some time during the day. When you recognise your own peak and low energy levels, you can work with your body clock to maintai...
Zen and the Art of Reptile Maintenance What's Zen got to do with your reptile's health? Not sure? Find out more in this article that examines what you should do to minimise problems and get the most ...
How You Can Avoid Becoming A Victim Of Identity Theft To reduce or minimize the risk of becoming a victim of identity theft or fraud, there are some basic steps you can take. The most important one is to ask perio...
Print this page