How much a customer is worth over time (and how much you can spend to get one)
Knows how to calculate what a customer is worth over a year, factoring in repeat purchases, and sets a spending limit for landing a new one without losing margin.
You pay a commission for every referral, raise your ad bid, or throw in a welcome discount, and you have no idea if that leaves you with a profit or a loss. You know what a single sale nets you, but not what that same customer ends up bringing in over the next twelve months, counting every time they come back. So you set your spending limit by gut feel, or you don't set one at all, and sometimes you get outbid by competitors, other times you overspend on customers who buy once and never return.
This course starts with your own numbers: the margin each sale leaves you, and how many times a year a repeat customer buys. With those two figures, you build the real value of a customer, without inflating it with your one star customer who isn't representative of anyone else. From there you get the ceiling on what you can pay to bring in a new one, split between a welcome discount, an ad bid, and a referral commission, without cutting into the margin you want to keep.
This is for you if you already have repeat sales or a handful of loyal customers and want to put a number on what keeping them is worth; it's not for you if you just opened and don't yet have a single customer who's come back to buy again.
- Calculate the real margin on a sale, subtracting only the costs that actually belong there
- Calculate how many times a year a repeat customer buys, based on your own sales
- Calculate the value of an average customer weighted by how many actually repeat, not by your most loyal one
- Set the spending ceiling per new customer and split it between discount, ad bid, and commission without touching your margin
Have last year's sales on hand, separating who bought once from who came back.
The 6 lessons
In the order it makes the most sense to read them.
- 1
What a customer is worth to you isn't what they pay the first time
By the end, you'll know that a customer's value is measured by what they bring in over a year, not by the amount of their first purchase, and you'll know how to calculate it with your own numbers.
7 min - 2
The number that counts is what you keep, not what you charge
You'll come away knowing that a customer's value is calculated on the margin of each sale, not on revenue, and you'll know which costs to subtract and which to leave out.
7 min - 3
How many times a year a repeat customer buys
You'll leave this lesson with your annual multiplier calculated from your own repeat customers, ready to multiply by the margin on a sale.
6 min - 4
The average customer isn't the one who buys the most from you
By the end, you'll calculate the real value of an average customer, weighted by how many actually repeat, not by your most loyal one.
5 min - 5
The ceiling on what you can pay for a new customer
By the end, you'll have the exact figure you can spend to get a new customer without touching the margin you want to earn.
7 min - 6
How high the discount, bid, or commission for bringing them in can go
You'll learn to think of the welcome discount, the ad bid, and the referral commission as parts of one single cap per customer, not as three separate costs that add up.
7 min