prioritise lifetime value

16% higher than non-referrals – the lifetime value for new referral customer
Donald Trump is, perhaps, the most talked-about US President in history. One of his features, viewed variously as good or bad, is his background in property and the extent to which that has made him transactional in his thinking. While I would agree that Donald Trump is very ‘transactional’, I would argue that this is not necessarily a consequence of his background in property. While property people can be transactional – in my experience – most businesses are inherently more transactional than they should be.
This observation reflects my concerns about advertising and promotion. Despite all of the data to the contrary, many businesses still seem to think that promotion is the key to success in business and believe that there is a direct relationship between the level investment in promotion (specifically advertising) and revenue.
The fact is, however, several factors impact sales, revenue, and profitability. Enquiry driven by advertising and promotion is just one of them. The others include:
  • Conversion
  • Average sale
  • Margins
  • Repeat business and referral
All of these factors impact significantly on the success of an enterprise. However, none of them is impacted substantially by advertising and promotion. Advertising and transactions drive enquiry, while relationship management tends to drive these factors.
To rely on advertising is to be transactional … just like Donald Trump. A better way to go is to focus on building relationships that maximise the lifetime value of each customer rather than the short-term transactional value.
To rely on or focus on advertising is to ignore statistics such as:

The transactional value of a customer is important, especially to a commissioned salesperson. However, the lifetime value every customer is more critical to the business. Maximising lifetime value is the key to driving marketing costs down and revenue up.


Don’t be transactional like Donald Trump. Focus on the lifetime value or potential value of every customer. Pay particular attention to developing relationships that drive profits.



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