By Jim Connolly
In today’s retail marketing article, I’m going to share one of the secrets behind the biggest, most successful retailers.
I’m going to share how they know what to spend on advertising or promotion. If you have ever wondered whether you’re spending too much or too little promoting your retail business, here’s what you need to know.
In order to attract new customers, in a way that’s highly profitable for your business, you need to know what the average customer is worth to you. Moreover, you need to know the average lifetime value of your customers.
Because once you know your customer Lifetime Value, (sometimes abbreviated to LTV), you know the maximum amount to invest in acquiring them.
Starbucks spend millions on advertising. They can do this, with great confidence, because they know what the average customer is worth to them.
Avinash Kaushik did some research, which shows the LTV of a Starbucks customer. Here’s an abridged version of what he did:
The end result was that the average Starbucks customer is worth over $14000 in total. That’s hard to imagine, if you focus on the short-term picture. However, by knowing that the LTV of a Starbucks customer is $14000 Starbucks can make informed decisions about what they are prepared to spend to acquire a new customer.
What I wanted to do here, was show you the basics of how to estimate the true value of an average customer. Obviously, your business model will be different from Starbucks, with totally different numbers. However, the basics are the same.
Thinking about the bigger picture, helps you make better decisions regarding what to spend on the marketing of your business. Without taking a longer-term look at the dollar value of a customer, it’s easy to spend too much or too little on acquiring new customers.
This is a huge subject and I recommend you spend some time researching it in more detail.
Finally, I hope you found this useful. Remember to check out all the other free retail marketing resources we have available for you here on the CTS Wholesale website.
To find out how CTS Wholesale can help your retail business, simply click here.