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Key Concept 3 Break Even on the Front End, Break the
Bank on the Back End
If you put the first two concepts together—you have to pay to acquire
new customers and there is a lifetime value to your customers—
you come up with this third concept.
Although you still want your overall marketing effort to have
an immediate return, acquiring new customers at a breakeven,
slight profit, or even a slight loss is now part of your game plan.
You’ll break the bank on the back end through the lifetime value of
that customer.
If you know that your average customer is worth $500 a year
and you’ll be able to hang onto them as customers for at least five
years, you have an average customer whose lifetime value is worth
$2,500 (500 × 5 = 2,500).
It comes down to this: What are you willing to give up to get
that person as a new customer? Twenty dollars? Fifty dollars? One
hundred dollars?
Because most retailers don’t look past the first transaction, they
aren’t willing to give anything up on the first transaction. They
think they are “giving it away” and they hate giving it away.
Once you understand that the real value in the customer comes
after the first transaction, it just makes sense to make some sacrifices
to get the first sale. You can shift your thinking from “Get a
customer to make a sale” to “Make a sale to get a customer.”
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