Pretend your business is a slot machine.
Everytime you put in $32, you get back $125.
Or everytime you put in $203, you get back $1,126.
How many times would play that slot?
Well, that IS how your business works. Let me explain:
I want to explain how to boil your business down to only
two numbers. And then use that to show you how one business
went from $2.7 million to $7.2 million without spending an
You can boil your online business down to two numbers.
This is how you cut through complexity and find simplicity.
Which is what I do for people.
I help you cut through the noise and get down to the heart
of the matter.
Any idiot can make things complex. Think about it. You probably
do a really good job at making things complex without anyone
The challenge is to make ’em simple so you can take action.
You can’t act on complex plans.
If you’re having troubles getting into gear, you need to simplify.
Here are the two numbers:
1. Cost to get a new customer
In marketing we call this “customer acquisition cost.”
2. The Lifetime Customer Value
You’ll see this referred to as LCV or LVC, however you want
to state it. Or just referred to as lifetime value for short.
Here are examples from the book Managing Customers As Investments
by Sunil Gupta and Donald Lehmann.
In 2002 Ameritrade spent $203 to get a new customer. The lifetime
value of a customer was $1,126.
So they spent $203 and got back $1,126. See how this is something
you can understand and sink your teeth into?
In 2003 Netflix had a lifetime customer value of $125 according
to the book. And the customer acquisition cost was $32.
So you put in $32 and you get back $125. How many times do you
want to put $32 into your slot machine?
Now, obviously those numbers are averages. And I’m SURE Netflix
has very different numbers today. This is just an example.
Vincent James sold supplements via direct mail.
He took a business that normally would make $2.7 on the front
end to $7.2 million just by adding forced continuity or
His customers would buy the first bottle for $59.95, call it
$60. Then they’d buy three more bottles for $40 on continuity
or recurring billing.
So if you add $60 to the three additional purchases for $40
($120 over 3 months) you get $180 customer value.
In other words, he took a $60 sale and turned it into a $180
sale. It cost him $30 to make the sale.
So he spent $30 and got back $180.
How many times would you do that if you could?
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The recurring billing back end was an extra $4.8 million
In another business, Vincent tells how he ran full-page
ads for a book. The ads broke even.
Then, a week after he sent the first book, he’d send a letter
for a related product at $200. 5% would buy.
Say he had 100 book buyers. Five out of the 100 would buy
the $200 offer. 5 x $200 = $1,000. One thousand dollars
divided by the 100 letters mailed equals $10 per customer.
In other words, he just added $10 to the lifetime value
of the customer.
He did that over and over. So it built up to where for
every $10,000 he spent on ads, when he included the back
end sales, he’d make $40,000.
So he put $10,000 into the business slot machine and got
Now, if you know about Vincent, he got in trouble with the
FTC and they took away most of what he made.
But that is a totally separate issue from understanding the
numbers of how business works.
So this is how a business works.
Let’s say you run an affiliate program.
You sell a $60 product and pay out a $40 commission. Each
customer has a value of $20. For simplicity sake, I won’t
include the cost of fulfillment.
But out of 1,000 customers over a period of a year how much
more revenue do you get?
That becomes your lifetimme value.
And now you have your business slot machine running.
Your goal over the year should be take that $20 per customer up
to say $100 or more.
PS: If you want to start an affiliate program for YOUR products
so you can really crank the traffic, get my complete A to Z
system I’ve used for many years in my OWN business:
Get your business slot machine geared up today!