To celebrate our daughter being back in school, and our chance to get back to work on a fairly regular basis, we decided to head out to lunch at our fav – Qdoba.
We spent a long time going over our goals for this fall, and talking about ways to bring in different types of clients. While we were talking about lead generation, we suddenly got onto the topic of lifetime value of customers.
We’ve been Qdoba regulars since they first came to town – at least six years ago. Qdoba has a frequent customer card that allows you to get one meal free when you purchase 10 meals. Because we usually go together – 2 meals at once – we usually can fill the card in five visits. 
Each meal is about $6, which means they give you $6 when you spend $60. We also made the assumption we filled one card every two months (it is our favorite place after all). Which means we spend about $360 a year, and they give us $36 of free food each year.
Because we’ve been going there for around six years now, we’ve spent about $2160 – if you assume everything I mentioned above is constant. [Wow, this is actually a great lesson for me – I can’t believe how much we’ve spent going out to lunch once every week or two.]
And because it’s one of our favorite lunch spots, we’ll be going there well into the future. Which means our lifetime value will end up being several thousand dollars. What’s an occasional free meal to someone who is going to bring several thousand dollars into your business?
You can see how quickly even $6 adds up. What about big ticket items? Maybe you have a $1000 monthly program, or several different products worth several hundred dollars a piece. How many times do your clients buy from you? What’s your overall lifetime customer value?
Once you find out how valuable a client is to you, you can begin to see how much you can spend to get a client through your doors. If your average client is worth $5000, maybe mailing $100 worth of marketing materials to gain that client isn’t very much after all.
As I’m planning two new promotions for the fall, I’ll be spending some of my time calculating the lifetime value of my clients. Even with quick calculations, I know my numbers are high. I’ll definitely be using this to come up with my promotions.
