Do You Know Your Customer Lifetime Value?
I was listening to an interview with Bill Harris from Centerpointe.
Here’s something quite astounding to most marketers.
Centerpointe.com is a site that sells relaxation audios. The product sells for $179 plus shipping.
Yet…every sale of that $179 product will bring Bill Harris an additional $800 in revenue over the long run.
How?
Well, each customer that buys his product will come back or send their friends to Centerpointe over and over again to buy additional modules.
From a $179 sale, Harris will end up making $800 from the average customer.
Harris does this through a savvy combo of personalized emails, bonus gifts, surprise follow ups and an excellent upsell system.
What’s your Customer Lifetime Value? And how can you increase it?
We’ll share ideas and tests in this blog over the coming weeks.
Now here’s a question for you.
If Harris was making $800 from the average new customer. And just 1% of his new visitors made a purchase. How much could he afford to bid on Google Adwords for a click without making a loss?
The answer is a whopping $8.00 per click.
I bet Harris isn’t bidding this much. But he’s certainly bidding high because he dominates Google for highly competitive terms like “Meditation”.
This advantages comes from understanding the concept of Customer Lifetime Value, learning to boost this value and knowing how much you can bid to get a new customer.
Knowing this can help you dominate adwords and strike a blow against your competitors.
Below: Centerpointe’s Site Screen Shot (www.Centerpointe.com)
In direct mail, it’s quite common to split mailings into 2 camps:
(1) customer acquisition – where the goal is to break even
(2)mailings to the house lise – these are the mailings that make all the profit.
In competitive markets, it would make sense to treat PPC as customer acquisition and give up the profit from that initial sale so you can build your customer DB faster.
Steve