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Thoughts on Lifetime Customer Value from Peter Fader’s book, Customer Centricity.

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Transcription

What is customer equity?

Hi, I’m Brian Pombo, welcome back to Brian J. Pombo Live.

Brought to you every day by AmazonProofBook.com. The website you go to to get your own free copy of, 9 Ways to Amazon Proof Your Business. It’s my own book on how to build a strategy long term strategies in order to defeat your competition in every way possible.

And so it’s, 9 Ways to Amazon Proof Your Business, free copy AmazonProofBook.com.

Now let’s talk about customer equity. What is customer equity?

Well, I really liked the definition put out by this book. This is Peter fader, customer centricity. It’s one of my favorites, it’s a really good read short read on if you’re interested in learning more about strategy, especially marketing strategy when it comes to focusing more from a customer perspective.

And in this is from chapter chapter three, the whole chapter is on customer equity. And here’s how he defines a customer equity is the sum of the customer lifetime values across a firm’s entire customer base.

Okay, so what’s that mean? So customer lifetime value, we’ve discussed that before. That’s the basic value that you have from a customer over the lifetime. Now, you may have different types of customers. And so their value is going to be significantly different depending on what type of customer they are, what market you’re pulling from, what products or services that they specify or stick to, it may be a demographic change, or what have you, but you’ll have different customer bases.

And from each of those you’ll have, you’ll have a basic customer lifetime value. Meaning this is this is what they’re bringing in versus how much they cost for their entire time that they’re with you.

And obviously, you get highs and lows, depending on where you’re at in the business and and how broadly, you’re defining that customer. But you take all those customer values, and you smash them all together, you pull, pull the sum from that, and that’s customer equity, that’s your overall customer equity.

That’s the value that you have from your entire customer base. It’s what you’re talking about. That’s what customer equity is. And it’s a term that doesn’t get tossed around too often that I found.

Oftentimes, when I’m talking to new clients, they have no idea. Oftentimes, I mean, if you don’t even know what your customer lifetime value is, that’s pretty typical. Don’t worry about it.

What you got to do though, is you might want to figure out some of these ideas, because it allows you to know how much advertising to spend, how much where you should be advertising and everything else comes from customer, lifetime. valuing customer equity gives you very much a larger view of where you’re going.

And it’s really good to take your customer equity and map it out over quarters and years to really find out whether you’re growing or not. Because if you have growing customer equity, especially if you’re looking at ever possibly selling your business, having a high customer equity value is going to attract the right type of buyer.

And it’s going to determine whether your business continues growing beyond you or whether it fizzles out.

Because if you don’t have the right values, that attract somebody that is going to build your business, you’re going to get someone that doesn’t know how to build a business and they’re going to run into the ground now maybe they’ll give you the right price and you don’t care what happens to your business.

But if you’re anything like me, and I think most business owners, your business is like your own child, you know you don’t want you don’t want to send it off to to to some horrible person that isn’t going to take care of them if you’re not able to.

So that’s another way of looking at customer equity. That’s the way I like to look at customer equity. Like I said, this is a pretty good book, Customer Centricity by Peter Fader and also my book, 9 Ways to Amazon-Proof Your Business.

We’ll be back tomorrow with another either strategy, tactic or principle that you could use directly in your business. You have a great night. In the meantime, get out there and let the magic happen.