Understanding the Long Term Value of a Client

Understanding the Long Term Value of a Client

As most of you know, I spend a good amount of money on Facebook ads.

Some people go crazy when I tell them I don’t mind “breaking even” and spending 12 dollars per conversion that will net me about 12 dollars.

When I hear this, it is clear that the person does not comprehend the concept of “Long-term client value.”

So I wrote this article to explain a bit about “why” as well as how to implement this idea in your business.

 

Determining Long-Term Value of a Client

Case Study: Chain Restaurants

I grew up fairly poor, but thankfully, I had my Mom who would love to clip coupons and show me ways to be frugal with my money. I was always puzzled as a little kid how big companies like Mcdonalds could just give away a free drink and fry with “any purchase (which for me was the faithful dollar menu)” and still make money.

Want to know the secret? THEY DON’T.

The Cost of the food, to employ workers to prepare the food, keep the lights on, etc. does not leave any profit on the table if someone gets a McChicken with no mayo from the dollar menu.

So it begs the question: Why do they do it?

 

The answer is they “gamble” right. They are literally betting on the fact that they will get a customer who brings their whole family in and uses the coupon; Or someone who wants the specialty burger and extra-large milkshake to go along with it.

They also know that by delivering value (that is higher than the perceived cost), they create a bond of trust with that customer/client who will hopefully keep on coming back without the coupons.

Of course, not all will, but some will. And it is the “some” that count.

 

Determining Appropriate Lead worth for ad Campaigns

Before you shut down your next ad campaign too early, think to yourself: What is a valuable lead worth to you? What is your lifelong worth
per customer?

For example, I like to work with Real Estate agents because it is so easy to turn a profit for them.

If you’re selling a 2M house with a 5% commission, you stand to make $100000 ($83,000 give or take after taxes). Wouldn’t it be worth it to spend $1200 to get 100 QUALITY 12-dollar leads?

Obviously yes- especially if you are trying to sell it quickly to build up your reputation.

Listen, soooo many people want to make something from nothing, skin every piece of wealth they can get off of one property. DON’T fall for this trap of “scarcity mentality.”

While you try to be stingy with revenue on one home, the RE agent who works with me and my team could have very well sold that same home two months ago and since moved on to sell one home per week minimum.

 

How to actually get the Long Term Value of a Client

So far, you should know that you can be a lot more lenient as far as ad cost when you understand “long term value.” But how do you actually “squeeze” the value out of them so that it is worth the cost of advertising? Pay close attention:

 

Importance of Sales Funnels

It doesn’t make any sense to send traffic to an offer if you can’t convert the traffic and can’t give them proper follow up.

You may think that I’m a crazed fanatic of ClickfunnelsTM- and I am. It is, hands down the best online sales funnel software out there.

If you aren’t using it yet, you can get a free trial here.

I won’t start an ad campaign on Facebook until I know the “email follow up” and phone lead sending is integrated into my sales funnels. If you need a good email autoresponder, click here.

 

Importance of Upsells

Upsells are the lifeblood of “Long-term value.” There always has to be a backend offer to what you are selling. Create an ebook. Make a video series. Make sure you add a subset of your services so that you get paid to deliver value to your industry.

If you need help, consult with me here or check out my basic breakdown in my free article here on upsells.

 

Contracts

When you have a great client who is paying you every month, you should consider keeping them on a private contract. The terms should be agreed upon and set beforehand. This way, both parties are committed to each other over a span of 6 months, 12 months, even 5-10 years.

The easiest way to send a document to get signed is via Electronic signature.

Using software, such as AdobeSign takes the stress out of having to drive up, fax, and annoy clients on the phone. You can simply send contracts via email or embed them inside of your website.

 

Recommendations and Building an “Infinite Audience”

Even though I am young, I am old-school. I appreciate when a friend of mine recommends a place for a great steak and cheese sub over commercialized ads. A lot of your marketing can be done by telling people to spread the word and especially when you incentivize this by giving out a royalty for landing you “more business contracts” or a “speaking gig.”

infinite audience

On Facebook, there is a way to create “lookalike audiences” that can then be turned into subset within a subset. This is a little more advanced, but it is something you can do to drive your ad cost down.

Conclusion

Always remember that you’re not involved in some “Get rich scandal.” Your building a long term business for clients.

Understand that if you continue delivering value, people are going to keep paying you for your products and services.

Obviously, I am not recommending ignoring lead cost. However, you should keep these ideas in the back of your mind when you are determining what is worth it for you and your company.

As always, If you need a specialist to work with you or for your company, you can contact me via this page.

Talk soon,

David

 

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