Monday, December 3, 2007

Time Value

It's tricky to know the value of advertising - SOOOO expensive, yet it's free if sales profits cover the expense.

A concept often overlooked is the so-called Time Value of a Customer: this is an approximate average of how much a new customer will spend with your company over the next few year's. Divide total sales in, say, the last five years, by the number of customers you have and calculate the average customer sale. Let's say you have 1000 customers and $1M in sales - then a rough back-of-the-envelope calculation is that each customer is worth $1000 in sales. So it's worth spending $1000 x P (where P is your overall profit margin) to get a new customer. We ask customers where they saw our ads to track which ads are working and which aren't. Why not tell us where you saw our ads? Please email - thanks! We'll send you a gift in return!

In our case, however, it's not all about sales - it's also very much about getting our customers the best products that will help their work go easier - "happy, prosperous and blessed"!

1 comment:

Danielle Employment Store said...

I couldn't agree more!
BTW - I actually heard of your company because PeerNet a social yahoo networking group in Rochester listed the Inc2007 List of Rochester companies back in August and I went to your website to find out more!

Congrats on your growth!