How To Calculate The Lifetime Value of a Customer.

Did you know that it can be up to 10x as expensive to acquire a new customer as it is to retain a current customer?


Seems outrageous, right?

That’s why it is CRUCIAL to retain, retain, retain!


In addition to your efforts to keep your customers coming back time and time again, it can be helpful to calculate the Lifetime Value of your customers.


What do we mean by this? The lifetime value of a customer is the total amount of money that any given customer will spend with you in your business throughout the duration of your relationship with that person.


Everyone’s lifetime value will be different, but it can be a great way to see how much return you are seeing on your efforts to retain customer loyalty.


Knowing the average lifetime value of your customers can be important for multiple reasons.


  1. This will help you with your pricing strategy, so that you are able to price competitively and in a way that keeps your customers coming back consistently

  2. It helps you see areas where you may want to improve your customer retention practices

  3. It can help you narrow who your ideal customers are by understanding who benefits most from your services and who you enjoy serving most!


To calculate the customer lifetime value, you are going to multiply the average dollar amount spent per visit X average number of repeat visits X the average retention time. (source: medium.com)


For example: If you have an average customer who spends $200 per visit, who visits 2 times per year, and who visits every year for 10 years…


$200 X 2 X 10 = $4,000


The lifetime value of that customer is $4,000


Keep in mind that this doesn’t take into consideration the value that comes from a positive review, referrals, or other forms of value that our customers bring to our businesses.


The lifetime value of a customer is something to keep in mind as you decide on pricing, retention efforts, and customer appreciation. When it comes to spoiling your guests- it’s almost always worth it!!



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