There are basically three ways in which to grow a business, namely:
Determining the value of a client can therefore be very useful. There is definitely a difference in the way we look at a potential client that is worth R50 vs R50 000 to our business.
Below is a formula you can use for such a calculation:
The value of existing client base ($) = N x V x F
N = number of clients (number)
V = average amount spent by clients at your business (value)
F = the number of times a year they spend the above-mentioned amount at your business (frequency).
The value of every new client you add = ($ x Y) / N
$ = the value of existing client base
Y = number of years the client remains with your business
N = number of clients.
This information gives you a better insight into the value of your existing client base and of new clients.
There are a few more questions the answers to which could help you focus your marketing actions for maximum results.
“If you are not serving a customer, your job is to be serving someone who is.”
Jon Carlson (Swedish businessman, CEO of SAS Group)
Article written by Jannie Rossouw, Head: Sanlam Business Market