Understanding the Lifetime Value of your Customer (LTV) equation.

I have not addressed Painful Experience #4 until now.

There is a pretty big reason for leaving it until last:

The solution to this pain encompasses more aspects of classical business failures, and it addresses many of the other pains indirectly.

Summary of Pain #4:

Forgetting the lifetime value of my customers was a painful experience!


The essence of Pain #4 comes from building your business on principles that are not founded on any lasting values. This core pain is at the root of many failed marketing plans as well as many failed business plans. (Marketing plans and business plans are fast becoming almost the same thing- Guy Kawasaki, The Art of the Start).

Theme Zoom prepares you for addressing this core pain by leading you towards a more comprehensive study of multi-channel marketing (MCM).

It is unlikely that you will break the 1 million dollar ceiling in any business unless you have a firm grasp on LTV. If you have broken this ceiling by accident (with a profoundly unique product), it is unlikely that you will keep your business debt-free without addressing the long term LTV equation.

One of the primary ways Theme Zoom solves this common problem for members is to address LTV through an educational process. For most business owners this is a process of continuing education covering direct response marketing and business development. In many cases we end up un-educating or "deprogramming" students from the old mindsets about marketing and business planning.

If you cannot easily calculate the lifetime value of your customer or access other vital marketing metrics produced by your business, you probably need to audit your own offline and online business and marketing activities.

We have provided Theme Zoom exclusive members with what I believe to be one of the most comprehensive courses on the web regarding this topic.

We call this course Gateway to Multi-Channel Marketing and it has taken us almost a year to make it available to you.

Why would we spend so much time preparing information that is not directly related to SEO and website development technology- and at great expensive I might add?

Reason 1:

LTV should drive your long term business strategies. This includes long term PPC strategy and successful website promotion.

Reason 2:

I have seen the future of website promotion . . . and it is offline.

As the Semantic Web becomes more of a reality, you will see an ironic twist in ecommerce. Everything will become pretty much as it was before the online gold rush, only faster.

Over the next five years, major offline catalog companies will begin to catch-up with you and implement the power of many of the advanced topics covered in this manual; topics which include Buoyant Page Ranking, Themed Linking and optimizing for the semantic web using wide synonymic nets.

According to Art Crowley, many of these companies are already well versed in the art of Multi-channel promotion used to drive customers online from offline mediums, including catalogs, television promotions, direct response mailings and much more. (We cover many of these topics in the Gateway material, available to Theme Zoom Exclusive members at no additional charge.)

You may ask yourself, "How can I compete with a massive catalog company?"

You don't really have to compete, you just need to be sure that you know the same things they know.

A smaller business has the advantage of moving with the market like a school of minnows (darting quickly and adapting to market changes) rather than moving slowly like a lumbering whale (that cannot change course or stop easily).

If you are reading this, and you are the VP marketing or CEO of a large corporation (which happens now within the new mash-up business intelligence environment) you can set about using the Gateway to Multi-Channel Marketing material to break your "lumbering whale" down into mini-plans and turn a ton of wasted "big-branding" dollars into direct response accountability for your company.

The size of your company does not matter when it comes to the use of the Gateway material.

The information provided to you in Art Crowley's course is some of the most powerful material I have seen when it comes to integrating the  three legs of the business success stool.

When we look for talent, we seek uber-successful people that fill in knowledge gaps that will allow us to make Theme Zoom into a better application.

Art was able to provide us with knowledge that profoundly improved and expanded upon the original Theme Zoom vision by adding the LTV factor into our algorithm. We will eventually offer a Theme Zoom add-on that will assist you in calculating LTV for long term PPC campaigns. The possibilities for your personal business potential while tracking a PPC campaign with this knowledge is to ultimately own your market by simply being able to pay more money up front to acquire a customer- than anyone else in your market. 

Lets look closer at this:

All of this sounds great, but what is LTV?

Here is LTV as revealed by Art in Gateway to Multi-Channel Marketing, SuccessTrak 3, page 16.

Client Lifetime Value (CLV) or Lifetime Value of Customer (LTV):

(also known as marginal net worth)

LTV is as close to an executive "magic 8-ball" as you're ever going to get in business. Every issue of product, capital, and marketing investment comes down to a single question:

"What impact will this have on the current future value of my client income stream?"

Now here's why lifetime value is so important and how you can use it to outmaneuver your competition:

Let's say you run an ad that costs $1,200 and you get 30 qualified prospects out of the effort. Then, your follow-up process converts three of those prospects into buyers and $375.00 per sale.

Your revenue (3 X $350 = $1,050) doesn't even cover your costs. What's more, your follow-up process cost you an extra $250.

Let's do a quick check on our profits from this marketing campaign.

Your gross margin is 62%. That means after you subtract your cost of the product on sales of $1,050, you generated $651 in gross profit.

And your total marketing expenses were $1,450 ($1,200 for the ad + $250 for the follow-up mailing).

This program generated a loss of $799 ($651 gross profit - $1,450 marketing costs).

Many businesses would consider this a complete failure. But those who understand how lifetime value works would be positively ecstatic about the outcome.

If you know that each client stays with your for, on average, five years and during those five years generates a net profit of $3,650 . . . your are thinking in terms of LTV.

With an LTV mindset you will know you have just invested $799 to acquire three new accounts (or three new bank accounts as Art likes to call them). That's an investment of $266.33 for a $3,650 profit stream over the next five years.

Savvy marketers will take a deal like this ALL DAY LONG, day in and day out- "buying" as many clients like this as they can get!

In this success trak Art goes on to connect the dots between other commonly confused topics about marketing, like "going negative" to acquire customers as well as why LTV means it is important to "make it easy for prospects to buy for the first time."

Summary:

Knowing the long-term value of a client generates a completely different mindset and evokes a sense of security that most business owners will never know.

I am speaking from my direct experience when I say that the integration and automation of vital metrics and LTV into my own business has profoundly increased my bottom line as well as my sense of control over the growth of my business.

When you understand that you can "buy bank accounts" all day, it gives your marketing efforts a different sort of flavor.

More importantly, when you know when you are overpaying for these bank accounts (bad marketing) you can increase or decrease your spending based on that knowledge. 

Because it has helped my business so much, I wanted to be sure that you had the same opportunity for growth and mind expansion. You really cannot fully implement the three legs of the business success stool without this knowledge. This is because so many of the sub-categories under each Leg/Agenda can be driven by the following LTV parameter:

"What impact will this (micro-action) have on the current and future value of my client income stream?"

I am excited to present to you a sneak preview of each profit tool contained within a given Success Trak from Gateway to Multi-Channel Marketing that will be made available to you January 10, 2008. Currently we only have a sneak preview of each Profit Tool within the FIRST Success Track. There are SIX Traks in total- with over 1800 pages of the most powerful and actionable material I've ever worked with.

I will be adding more previews over the next couple weeks. Even the Preview of these Profit Tools contain immense value.

Get ready to own your market, and to create a business that is the only viable option for anyone looking for your product or service.

See you on the inside.