PRIRODA PRIRODA
The Phenomena of the physical world, also to life in general.
Entrepreneurship

What is the Value of a Customer?

I come to this, i get a lot of young guns complaining that there is no profit or that there is no value derived from working for set asset. But no delivered tasks can be labeled as non value generating. There may not be any immediate justifiable revenue but if you go a bit calculative considering a period of time. There is a revenue. That you can see when you look for finding a Value of a Customer.

Here is a simple formula by Jay Abraham which is actually a rational way to value a customer.
What we do here is simply evaluating the minor profit and reducing the costs of marketing.

LV = (P x F) x N – MC

Here’s what it all means:

LV is the life time value of a customer
P is the average profit margin from each sale
F is the number of times a customer buys each year
N is the number of years customers stay with you
MC is the marketing cost per customer (total costs/number of customers)

Once you know how much you need to spend to attract a new customer, you will know how much of an incentive you can offer to a business to help attract new customers.

EG a Client That buys a Software worth 1,00,000/- twice:
20000(P) x 2(F) x 1(N) – 2000(MC)
40000-2000
38000 is my LV (Life Time Value of a Customer over a Year)

A client for facebook advertisement that spends 100$ a month (100$ @ 106 = 10600/- +20% Service = 2120(P))
2120(p) x 12(F) x 1(N) – 1000(MC)
24440/-

*Jay Abraham, He is known for his work in developing strategies for direct-response marketing in the 1970s. In 2000, Forbes listed him as one of the top five executive coaches in the US