Why B2B Marketers Should Focus on Lifetime Value

Too many B2B marketers have a shortsighted view about objectives. They may rightly be concerned with a campaign’s efficiency in generating leads or sales, and evaluate the results of each campaign in terms of the total amount of money spent and the short-term gain achieved.

By contrast, the successful marketer knows that marketing is a long-term process. He knows that the true value of each new sale is not just the immediate profit received; it is in the lifetime value of the new customer. He also knows it costs only one-tenth to one-fifth as much to sell a product or service to an existing customer as it does to acquire a new customer. This is why progressive organizations spend so much effort on the care and feeding of the customer, and on understanding the lifetime value of each new customer.

After calculating lifetime customer value, two things should become apparent. First, because of the long-term profit potential, most organizations should be willing to increase the amount of money they are willing to spend to acquire a new customer. Second, individual customers are more important (and profitable) than most of us realize, and should be treated accordingly. Above all, make sure you keep the customers you acquire.

A short example will illustrate this point. I was in Victoria BC earlier this week (after a terrific kayaking trip off Quadra Island – highly recommended).  My wife and I stayed at the Delta Victoria Hotel, a really good hotel right on Victoria Harbor. Our dinner was seriously delayed. I did not have to complain to the restaurant manager (Mark) – he actually came to our table, apologized profusely and told us that the dinner (minus adult beverages and desert) was on the house. What Mark didn’t know was that I almost always do a hotel review on TripAdvisor.com and had he not intervened to make the situation right, the restaurant would have gotten a very different type of review than the glowing recommendation I actually provided and we would not have stayed at the Delta next time we are in Victoria. 

Good marketers think about lifetime value, not just about how to get the most money out of each customer on every transaction.  More info on how to create lifetime value can be found at the Fusion Marketing Partners website.