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What’s a customer really worth?

Can you afford marketing? That’s a good question. The answer is a question itself: Can you afford to NOT market your business?

One of the most fundamental of all business processes is finding new customers. And to do that you need to spend money — on your brand, on your story, and on getting your story out through all sorts of avenues including most social media options. But the first question any business owner should ask when figuring out how much he or she should spend on marketing is: How much is a customer worth to me? That question, successfully answered, will be the driver for any successful marketing campaign. This will determine how much you’re willing to spend to get a customer — which in turn will dictate what you need to get from each of your marketing dollars.

Most importantly, what a customer is worth over his or her lifetime might actually be surprising if you take the time to do the math.

Chris Zane, owner of Zane’s Cycles in Branford, Conn., articulates customer worth very well at

Tropicana, one of our partners on the commercial side of our business, once said that the lifetime value of one of their customers is $32,500. They arrived at that figure by estimating that the average customer will buy somewhere in the neighborhood of 6,000 cartons of their juice over the customer’s lifetime. No wonder the company’s marketing efforts are focused on children. The lifetime customer value to the owner of your neighborhood pizza joint is approximately $25,000. That’s a lot of pizza—and the sooner the owner realizes that his or her customers have more value than the $20 pepperoni special they just ordered, the more successful the owner can be.

But getting the value of that customer to be so strong has a lot to do with the experience you’re willing to create. As Zane continues in Forbes:

Any business owner looking to achieve long-term success must determine what a lifetime relationship with his or her customer is actually worth in revenue. This enables you to shift your focus from individual transactions and simply making a buck in the short term to building trust and establishing lifetime relationships that will undoubtedly pay off. If you can shift your thinking away from merely selling and into building a relationship and establishing trust instead, even if it costs you a few bucks in profit, you’ll begin to realize opportunities you never imagined.

It starts when you understand what it means to “wow” your customers by giving them more than they expected. When at my company we started adjusting our thinking about our customers and began to consider the lifetime value of their business—our lifetime customer value number is $12,500, which will deliver $5,250 profit to our company—we became able to shift our thinking to what we were willing to spend to turn all those one-time purchases into lifetime customers.

Any business that isn’t thinking along these lines is simply playing the wrong game.

Once it’s pretty clear that creating a good customer experience can add to the value of that customer, the next step is doing the math. And Harvard Business School has a pretty nifty tool to help you do exactly that. The short version is to look at what your average customer spends, then add what you up-sell over the life of a customer. And then, of course, be sure to take into account the number of customers each new customer brings you in turn. As Barry Moltz from Shafran Moltz Group puts it:

A customer that provides ‘buzz” for your company multiplies the effect of their purchases. For example, if a customer refers two other customers—which the business didn’t pay for to acquire—then they can be worth three times their original sale boosting their LTV (Long Term Value).

So create that good customer experience, and then be sure to be asking for referrals from your well-satisfied existing customers.

Once you’ve done the math and accounted for all that goes into the true value of a customer, you’ll then start to really understand how you should be spending more to carefully seek out and develop new customers through all sorts of means you might not effectively be using now.