Maximizing Profitability Through Customer Retention  

Customer retention has a huge impact on maximizing the profitability of your business.
By increasing customer satisfaction, you have the enormous opportunity to increase sales to existing customers, thereby greatly reducing the cost of sales and marketing.

This allows you to retain customers for a longer period of time, thereby positively impacting your sales and marketing.

You can also increase customer retention by offering what is valuable to your customers so they keep coming back for more.

Lifetime Customer Value

The longer customers remain loyal to you, the more valuable they become to your business. One of the concepts you will learn about in the Entrepreneur Business Model Course is the lifetime value of a customer.  This metric helps you understand just that -the lifetime value of a customer as it measures the impact of customer satisfaction on long-term profitability.

Brad Sugars believes the lifetime value of a customer is perhaps the most important metric for an entrepreneur. This is because once you know how much repeat business you can expect from a customer, you will be able to make sound decisions about how much you are willing to spend in order to “buy” a new customer.

Here’s how you can calculate this metric.

The simplest and best way to estimate lifetime value is to use actual (or estimated) numbers into the following equation:

(Average Value of a Sale) X (Number of Repeat Transactions) X (Average Retention Time in Months or Years for a Typical Customer)

Let’s say, we are measuring the the lifetime value of a club member who spends $50 every month for 2 years. The value of that customer would be:

$50 X 12 months X 2 years = $1,200 in total revenue (or $600 per year)

In todays world, with an increased use of social networking sites, it has become even more critical to focus on great customer service and these channels can be used to augment customer loyalty and retention.

At the Brad Sugars Business Academy, you will learn this concept in greater detail in Entrepreneur Business Model Course.

Brad will show you his formula and method for calculating the lifetime value of a customer and help you do this exercise in the context of your own business. He will also explain in detail the concepts of allowable acquisition cost and investment acquisition cost so you can master this concept and apply it successfully to your own business.

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