Customer value and email marketing

lead generation systems Focused Lead GenerationMany businesses throw away profits because they don’t understand the relationship between customer value and email marketing.

There are two factors at play here, and we’ll deal with each one in turn.  The first factor is ‘customer value’.  What exactly does that mean and how do you figure out what a customer is worth to you?

Customer value or ‘Lifetime Value of a Customer’ as it’s often referred to, is a key factor in determining how much time, effort and money it’s worthwhile putting into acquiring and retaining a customer.  Most businesses focus their efforts on acquiring new customers.  It’s obviously necessary to get new customers, but, did you know that statistics show that it costs 5 or 6 times more to acquire a new customer than it does to sell again to an existing customer?

There’s a good reason for this.  Before someone buys from you, they don’t know you.  It takes an average of 12 contacts before they become interested in doing business with you. These contacts all cost money.  Whereas, it’s relatively quick and easy to sell an additional service or product to an existing customer – especially within the first 45 days of a previous purchase.  It’s even quicker and easier to sell an additional product at the same time as they make the initial purchase.

Here’s a quick and simple way to calculate what a customer is worth to you long term and how much it’s worth spending on acquiring and keeping them.

How to calculate lifetime value of a customerSimple formula for calculating Lifetime Value of a Customer:

Step 1: Average sale x average number of repeat sales per month  x average length of time that the customer stays a customer 

e.g Average sale = $20 x Average repeat sales per month  = 2 x Average lifetime of customer = 24 months

$20 x 2 x 24 = $960 (ie gross value)

Step 2:  Gross value – (gross cost of product or service + discounts)

In other words, you factor in all the relevant costs and deduct this from the gross value and you’re left with the net Lifetime Value of your customer.

Obviously this is a simplistic approach and you could get a lot more detailed by segmenting different types of products and customers and so on.  But, this will give you a basic idea of what an average customer would be worth and how much you could reasonably spend on both acquiring and retaining them.

Now that you know about how to determine your customer value, let’s take a look at why email marketing is s very simple and effective – not to mention cost-effective way to maximize the retention and value of your customers.

Email marketing is perhaps your lowest cost marketing tool.

Did you know that up to 80% of customer attrition is attributed to vendor neglect?  It’s true.  The biggest reason for losing customers is that businesses do not follow up and stay in touch with them.  It’s very understandable – especially for small businesses.  But, it’s also a devastating problem.  However, it’s a problem that’s very easy to fix. focused lead generation services

The lowest cost and biggest bang for your buck tool is email marketing.  I’m not talking about spam emails. I mean emails that provide real value to your customers and are designed to increase a bond with them.  Developing brand loyalty by staying in touch is not only sensible, it’s profitable.

Most email autoresponder service providers are relatively inexpensive.  They may range from $15 to $20 per month for smaller customer database of 500 up to 2,000 depending on the provider.  With most of the reputable providers, you can send unlimited numbers of emails to your database in any given month.  You could send out an email newsletter, an email update, a product offer, tips and ‘how to’s’ all in the same month and it wouldn’t cost you a cent more.

The key to successful email marketing is that it has to provide something of value to the customer – otherwise they will quickly unsubscribe. The best way to get their email addresses is to:

  • make it part of the payment process at the check out
  • provide some kind of incentive on your web presence eg offer a free report in exchange for their email address

Most popular email autoresponder service providers: email marketing

An email autoresponder is simply an email that has been created and prescheduled to get sent out automatically at a specific time.

The most popular service providers are aWeber.com, getresponse.com, icontact.com and constantcontact.com

There are quite a few of these services around and it’s important for you to do your research  before selecting them.

For instance, aWeber offers a good facility for creating both follow up messages as well as broadcast emails – check out the definition of these on their site.  They also offer templates so that your emails and opti in boxes can be made attractive with graphic elements, photos and so on.  On the downside, they do not allow you to simply import your existing customer database automatically.  When you do import contacts, they have to opt in to receive your emails again, even if they’ve done so previously.

Constant Contact is a little easier in this respect although they do have strict guidelines.  They, however, only allow a single autoresponder. They’re great for doing things such as a monthly newsletter, but you can’t really set up an entire email campaign in advance.

Get Response is similar to aWeber in many respects and iContact also has many similarities but make it easier to import your contacts than aWeber.

2 + 2 = 4 and more

The concept is easy to understand, and relatively easy to implement.  Once you’ve figured out what it’s worth you spending to acquire a new customer, then assign a certain portion of what’s left to retaining them using email marketing.  It’s so low cost that it’s downright silly not to. Your effort will do a lot more than pay for itself.  It will increase your length and rate of retention as well as increase your sales.

If you need help figuring this out, don’t hesitate to contact us.



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