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Customer Lifetime Value Formula

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After reading an associates article about ways to collect existing and potential customer information, I thought I’d throw in my two cents on the topic. The question about how you can acquire personal information from existing and potential customers who visit your website is very important for several reasons.



Having knowledge about your customer base has myriad benefits but, hands down, the most important benefit of obtaining this critical information is using it to establish a strong enough relationship with them to encourage repeat sales and boost their “lifetime value." Lifetime value is a term for how much a loyal customer is worth – how much they’ll spend – over the course of their relationship with your business. Hopefully, that relationship lasts their entire lifetime, literally.

That said, here are four more ways to acquire personal information from your customers.

Add a Member’s-Only Section to Your Site

Encourage more customer interaction by adding a special member’s-only section to your website. This section should be a special area for existing customers and anyone else, for that matter – after they register (and give you their information in the process).

When your customers enter the members-only section, they should have access to member-only specials or discounts, as well as specialized information that’s exclusive to members. An example would be a nutrition company offering the latest insights about health and nutrition.

If you provide enough value for your members, you can start to ask them to participate in activities that will give you more insight into their lifestyles – like quick surveys about their habits and what products or services they value the most. You can then gather that information and post it in your members-only section to provide compelling reasons for members to visit frequently.

Let the members know you appreciate their thoughts and value their opinions. The “member’s-only" title makes the area appear special – and it is – but don’t limit access to the section; everyone who registers should be allowed to login and access the information. Remember, your goal is to collect information from as many existing and potential customers as possible.

Since you’ll be implementing a section to your site that has restricted access, you’ll need to integrate some sort of login function. A good IT staffer should be able to handle this no problem, but if you’re a super-small operation and don’t have that kind of resource, you can use a web-development tool like this one. Yes, it costs money, but only about as much as it would to pay an IT professional to do the same thing, and sometimes taking the DIY approach can be more beneficial than you think – knowing how to manage the back end of your site can certainly come in handy.

Take Advantage of Message Boards

Taking advantage of online message boards is a great way to learn about your customers. Message boards are simply forums where people interested in the same topics can go to post their ideas and thoughts on subjects of their choice, get advice from experts, and socialize.

Like with the members-only section, you’ll want to include a registration section so visitors can join the board, and you can collect their information in the process. You don’t have to require registration, but make sure it’s available. There are all sorts of great resources for this. My personal favorite is Invision’s Power Board. It’s easy to install and manage, and it has all the built-in tools you’ll ever need.

Once you’ve got some visitors to your message board, you can let them suggest topics that they want to discuss and you can be the moderator. This gives you a chance to learn what subjects concern them so you can provide targeted information for their needs. You can also post discussion topics of your own to see how people respond to them.

Visit your message boards frequently to find out what your customers are talking about – what’s on their minds. These messages can provide invaluable insights into what your customers think and what they want. Not only are message boards a great tool for you to learn more about your customers, but they also create a sense of community that, if popular, will increase your site traffic dramatically. Really, they’re a must-have for your online presence.

Besides having a message board on your site, you can also visit other public message boards and even set up your own remote boards that are hosted on another site. The advantage to using these is that they’re hosted by sites that already get a lot of traffic, so you can really build up a user base even if your website doesn’t get a lot of traffic. Some good places to establish free message boards are: Yahoo! Groups, MSN Groups, and Google Groups.

Encourage Your Customers to Complete Satisfaction Surveys

When a customer makes a purchase on your website or in your store, send them a short satisfaction survey – either electronic via email or hardcopy via the regular old U.S. Postal Service. You can personalize the surveys depending on what they purchased, or you can just send out a standard survey to everyone.

Customers, the same as just about everyone, like to be appreciated. Satisfaction surveys show them that you’re interested in their thoughts and that you value their patronage and their opinions. You might want to develop the surveys on your own, but you can easily have your employees circulate them. When you get them back, compile the results in a spreadsheet program like Microsoft Excel.

Like just about any method of acquiring data, it’s a good idea to give your customers an incentive to fill out the survey. For example, you could enter all of the completed surveys in a weekly or monthly drawing for a free product or service or some other prize.

Beef Up Your Referral System

Ian talked about adding a tell-a-friend option to your website. It’s a wonderful idea, but I’d like to elaborate on that just a bit. You can greatly improve your rate of referrals if you offer an incentive – are you seeing a pattern yet? Encourage your customers to send their friends and family to your website by offering a referral bonus.

This special bonus can be in the form of discounts, free services, or – what I think is most effective – cold, hard cash. Everyone likes a little more cash in their pockets, and if they like your service already, they might drive a lot of customers your way - you’ll practically have another sales rep on your team. And be sure to make a big deal about the referral to everyone who is involved – remember, customers like to be appreciated.

An easy way to generate referrals is to print simple business cards that you can give to existing customers to hand out to their friends. Include your contact information, including your website address, and include the referral bonus system you have in place – you never know how big your referral system can get if you nurture it.

Implementing These Ideas

All of these suggestions for increasing your existing and potential customer-data acquisition are easy and inexpensive to implement, and they’ll have you reaping huge benefits in the form of a larger customer base and increased lifetime value of those customers. With just a little effort on your part you can learn a lot about what your customers think and what they want and, in turn, you’ll see your sales increase noticeably.
Customer Lifetime Value Formula
Go to any seminar, pick up any book, listen to any course on marketing, and you'll pretty quickly run up against the term "Patient Lifetime Value", or "Lifetime Value of a Client" or some other derivation of the theme.

It's an idea that's seductively simple & makes great intuitive sense - "Of course, if I knew the average value of any new patient, it would be useful in my practice!"

Without a few key refinements, though, this is a concept that can cost you a LOT of time, effort, energy, and money.

In fact, until being taught these refinements, most doctors find themselves thinking "There must be something to this idea - everybody and their brother talks about it - so why isn't it doing MY practice any good?"

Explaining patient lifetime value

Theoretically, it's a great shorthand to understand the monetary value of each patient, which gives you an idea of how much you can invest in new patient acquisition.

It’s almost always explained with some derivation of the following:

"I know you have some patients who have only one visit, and others who've had hundreds. But what if we took the average of all those visits? What is the average visit number for each of your patients?

Well, if we take that number, and multiply it by your fee per visit, that gives us a dollar value that we can think of as the Patient Lifetime value. Over time, every new patient who walks through the door will, on average, generate that much in fees. So, logically, you can spend nearly that much to attract new patients and still be profitable!"

Why the idea is dangerous to your practice

It's a simple concept to wrap your head around, and it makes a lot of sense on an intellectual level. But what these books, courses, and seminars almost never tell you is that just having ONE lifetime value number is a fast way to waste a LOT of money

If you just look at the "patient lifetime value", which is an average across your entire patient base, you can't determine what is COMMON to those patients who leave within a month, or what's common to those patients who stay with you for years

Just looking at this single "Patient Lifetime Value" number clouds a LOT of very useful information - For example, let's say you get new patients primarily through yellow pages & referrals. It might be the case that only 10% of referrals quit within 45 days, while 60% of yellow pages patients quit during the same time frame

When do you use patient lifetime value?

That's not to say that the concept of looking at average visits or dollar values is invalid - far from it, it's one of the MOST useful things you can do in your practice… WHEN you do it the right way.

The most useful way to put this type of number to work is to look at it in a few different subsets of your patients, rather than as one catch-all number.

For example, you might want to look at the average across all patients. Then look at the average value of patients who have more than 5 visits. Then more than 10 visits.

You might want to look at the average value of patients who are under 20 years old when they join your practice, vs. over 50.

Or, you might want to look at the average value of patients who come in through referral, vs. newspaper advertisement.

Where does this get you?

With many specific "patient lifetime value" numbers to work with, you're in a much better position to understand exactly what is happening with your practice. There are 2 main takeaways from having these numbers at hand

The 2 benefits of segmented Patient Lifetime Value numbers

1. It gives you a MUCH better idea of the kind of patient that you want to attract

For example, if you find that patients who are over 45 years old and who came in through a referral have a patient lifetime value that is 500% greater than those under 30 who come in through the yellow pages... Then you most certainly want to work MUCH harder to attract the former.

2. It gives you a clear direction of where to put your marketing effort & dollars

If you find that your "average" visit from a patient is 35, but that if they stay for more than 5 visits, the average visit number rises to 55 - Then clearly there is a LOT of benefit to be derived from encouraging patients to come back for at least their first 5 visits.

This could lead you to reorganize how you handle your first visit, how you keep in touch with patients during their first 5 visits, and to generally re-consider how to make it easier for them to decide to come in during this critical early stage

Taking the flaws out of “Patient Lifetime Value"

So, next time you're in a seminar, or reading a book, or listening to a course that inevitably brings up the concept of "patient lifetime value', don't just take it at face value - instead, take the time they're using to explain this simple idea, and think about additional ways that you can group your patients to get a MUCH more useful average value understanding.

And when people ask how you're doing SO well, you can breezily tell them "Oh, you know - I'm just paying attention to Patient Lifetime Value" - and let them wonder why THEY'RE not getting it.

Want to learn more?

Understanding Patients Lifetime Value is one of the many strategies covered in Real World Growth Strategies for Your Practice – an exciting new marketing program for Chiropractors. To find out more, call Scott at: 905-963-3771, or e-mail info@svachiro.com

Did you find this useful?

Why not send it on to friends and colleagues and share the knowledge with others. Alternatively you can reprint these tips in your own website or newsletter, but please include the following information:

------------------------------------------------------------------------

Shawn Veltman is a marketing consultant and the creator

Of the highly acclaimed ‘Real World Growth Strategies’ program

for Chiropractors. To find out more, e-mail info@svachiro.com

--------------------------------------------------------------------------
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Both Stephanie Leuer & Shawn Veltman are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Stephanie Leuer has sinced written about articles on various topics from Anger Management, Pets. Author: Stephanie A. LeuerWeb Site: www.lowhangingfruit.comEmail: Phone: 563-323-4609 Stephanie A. Leuer is. Stephanie Leuer's top article generates over 18100 views. to your Favourites.

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