December 07, 2021

Customer Value

Here's a common scenario:
  1. An organically acquired customer costs you $0.00 profit and generates $40.00 in the future, for a net of $40.00 profit.
  2. A relationship-centric customer (acquired via email or print or events) might cost you $10.00 to acquire while generating $35.00 in the future, for a net of $25.00 profit.
  3. A transaction-centric customer (acquired via Amazon or Google or Facebook or any Marketplace) might cost you $3.00 of profit while generating $15.00 in the future, for a net of $12.00 profit.

So you're dealing with either $40.00 of long-term profit, $25.00 of long-term profit, or $12.00 of long-term profit.

The instinct of many marketers is to ignore the $12.00 of long-term profit, because those customers are worth less-than-half of what everybody else is worth. Go out on LinkedIn and listen to the experts, they'll tell ya.

As we move into 2022, we're all dealing with separate businesses all folded together into one "brand". The relationship experts on LinkedIn will tell you to avoid the transaction-centric customer. It's one of their arguments to keep throwing catalogs in the mail even when you don't have enough paper to do just that. And they're partially right ... you'll generate more profit going after the relationship-centric customer.

But there's nothing wrong with building a business that caters to a transaction-centric customer, especially if you can generate enough long-term profit to make the math work. Do your Customer Value work, and see what the math tells you.

No comments:

Post a Comment

Note: Only a member of this blog may post a comment.

Best Practices? Probably Not. Sold Out? Yeah!

From time to time I share information with you from the fish monger in downtown Phoenix. And I know you'll tell me that they're a sm...