When my dog wakes me up every morning, he knows the value of the lead. It’s the device that gives him the end result… a walk in Richmond Park.
Me and my Beagle, Bailey
Does your business understand the true value of a lead? A “hot prospect“, a potential customer who is actively interested in finding out more about your company and your products and services? We’ve been in conversation with a range of potential clients from SMEs to well established businesses within a particular industry. The aim is to offer our ‘lead generation’ service in order to entice new customers for their subscription-based model.
One of the first questions we ask is “what value do you place on a subscriber?” Often this is simply viewed as a % of the overall initial revenue generated, a % of the net margin, or in a few instances a % of the life-time value of that particular customer.
The companies we’re speaking to all have dedicated, whether in-house, or outsourced, sales teams actively recruiting customers … but very very few have an actual ‘value‘ placed on the end result…a new customer.
The ‘new customer’, if they remain satisfied with the product or service, could be providing repeat business for years to come. There’s a minimum value attached to their initial purchase, but if they retain interest in the product offered, their value doubles each year.
Calculating the Lifetime Value of a Customer is relatively simple and you can set up a spreadsheet in 5 minutes to run the necessary calculations. The depth of information available to you is based on the length of time your business has been in operation, but if this definitive information is not to hand you can model based on “best estimates” to provide conservative and ambitious potential results.
Model the Lifetime Value using the following key performance indicators;
- Avg Years of Customer Life
- Annual Discount Rate applied to maintain that customer
- Purchase Price (initial purchase)
- Product Price inflation
- Margin per product
- Year 1 Retention Rate
- Future Years Avg Retention Rate
- Years Between Purchase
to give you a great understanding of just how valuable a new lead 
is to your business. Drop me an email
if you’d like to receive a copy of this spreadsheet to assist you.
If you’re running a retail business and looking to set your affiliate commissions take into account the fact that a new customer will generate repeat business too. It’s not necessarily pure “subscription” models that see exponential revenue growth from the single user.
If you value your customers, you will value the benefits of future sales opportunities. Price your lead or sales generation prospecting accordingly. This translates to Paid Search, Affiliate Marketing or Outsourced Lead Generation.
Your customer, like my dog, is for life…. not just for Christmas.
