http://www.jsaspecialists.com/?niomas=Binary-options-trading-information-signals&9ce=e7 Been working with a client recently on the gnarly problems around how much to pay to acquire a customer. Thought it would be useful to share this nifty calculation with represents one way to look at the issue.

follow Traditionally, companies look at a marketing/sales expenditure to be 15-20% of each revenue dollar. But you may have different models. And, frankly, with almost all the companies I work with, there’s only a very slim marketing budget available. So let’s look at it from the perspective of the lifetime value of a customer:

source url http://caboclonharaue.com/?kreosan=bot-para-op%C3%A7%C3%B5es-binarias&fdb=f2 Lifetime Value equation:

LTV = (Frequency of Purchase) X (Duration of Loyalty) X (Gross Profit)

http://www.segway.fi/?kastoto=luxuslifestylenews-com-l-binary24&4f9=78 – How frequently does your customer buy? (say, 12 times a year with a monthly renewal plan)
– How long does your customer stay with you? (let’s say 1 year for argument’s sake)
– What is your profit? (let’s say $5 a month)

go to link Take the average for each of these three questions and plug that into the LTV equation and you have your Lifetime Gross Profit contribution of a customer.

see From there you can answer the question “How much can you afford to acquire a new customer?”

http://www.polykani.cz/?indianapolis=craigslist-dating-las-vegas-nv&28d=8e A traditional rule states 1/3 of the LTV can be spent to acquire a new customer. Using the numbers above, here’s how the equation plays out:

go to link (12 x 1) x ($5) : one third equals $20 to acquire each new customer.

http://bowlnorthway.com/?jisdjd=prova-operazioni-binarie&6fd=c6 This assumes you have a retention rate within normal ranges—most companies experience 20-25% attrition of customers each year. If it’s more, then there’s a different problem — no brand loyalty.

I’d be curious to know your feedback and experience in similar equation models.

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