Member Since: 28th Jul 2006
Founder Director Univbrands
26th Jan 2008
An excellent introduction to lifetime value of a customer.
The lifetime value of a customer increases further if you take into consideration the number of referrals a satisfied customer makes.
Businesses that value their customers benefit by tracking the new customers that they help bring in.
The formula I use to forecast this value is estimate the number of people that the prospect or customer could have (Number of potential customers "Christmas Cards" are sent to) and divide that by the "referral objective" (Say 5% of these potential contacts for each year.)
Multiply this by the acquisition costs you save and you will get the additional value as a result of referrals.
I hope this explanation is as lucid as Dr. Craven's. I suspect it's not.