Embracing lifetime value

http://sethgodin.typepad.com/seths_blog/2009/11/embracing-lifetime-value.html

Posted by Seth Godin
November 19, 2009

Seth discusses a valuable topic for all small businesses to consider: How much am I spending to acquire each new customer (customer acquisition cost), and how much profit will I see from that customer over my lifetime contact with them? If you run a business that doesn’t generate repeat business, then you need to make sure that you recover all your costs on the first (and only visit). If you run a business that involves recurring monthly revenue, you need to consider the overall value of that customer (both in how you attract new customers, and how much you are willing to spend to keep existing customers). I was involved in a business that was spending $270 on average to acquire customers with a lifetime value of $176. Clearly, not a sustainable business model.