What’s the Lifetime Value of Your Average Client?

One of the questions I’ve been asking myself over the last three months has been, “How much should I spend on marketing and advertising on a per client basis?”  Essentially, I’m trying to figure out how much is too much so I’m not wasting money and eroding my net income.  Determining this value could also be useful when planning my monthly clothing expense budget.

I just finished a great book called, Buying Customers: Revolutionary new rules for you to get more customers with far less money, by Brad Sugars.  In his book, Sugars discusses the importance of looking at marketing and lead generation as an investment rather than an expense.  Why is that?

Well … when you calculate the Lifetime Value of your average client or customer, you might realize that you can spend more than you thought to attract new clients or “assets” to your business.

This week I took the time to determine the Lifetime Value of my average client as well as my highest spending clients.  Here’s what I discovered:

First, I wanted to look at the value of an average client in 2016.  To calculate this, I took my annual sales divided by the number of active members and came up with $1,675.  Our clients on Pure Barre Platinum (12-month contract) pay $139 x 12 months = $1,668, so I find it valuable to know that an average client would spend about $140 each month on classes and clothing.

Next, I ran a “Big Spenders” report in MindBody, which is the client management software we use at my studios, to determine the value of my top clients in 2016.  My top 100 clients, or the top spending 100 clients, had an average annual value of $2,545.  My top 10 clients, or the 10 clients who spent the most at my studios, had an average annual value of $4,097!  This means my very best clients were spending about $341 each month or 144% more than my average client!

But these are just annual average values and my typical client stays on for about 3 years.  This number was a little tricky to determine, but I did the best I could looking at my top 20 clients and how long they’d been taking class.  Then I did a simple average to come up with the 3 years.

Based on this information, the Lifetime Value of my average client is $5,025 and the Lifetime Value of my top clients is $12,291.  Or is it?  Each client usually refers at least one friend, so the Lifetime Value of each client at my studios is between $10,050 and $24,582!

What does this mean?  Well, if we don’t get a client to purchase a package beyond our $99 Intro Month, we’ve lost not the value of the next package, but potentially $25,000 or more depending on how many friends that client refers.  Yikes!

It also means that I now have a baseline from which to determine my marketing and advertising expenditures to attract new clients.  If the average client has a Lifetime Value of $10,050, then I can probably spend a little more money than what I have been to acquire new clients.  Specifically, I want to host more events at the studios to promote our Pure Barre community and now I know that spending that extra money makes sense, especially if I can attract more people like my top clients.

Cue the G.I. Joe public service announcement!

I’ve received several inquiries over the last few weeks about what makeup and skincare products I use.  I’ll share my skincare routine with you in my next post.

I’ve also made significant progress writing my book on how to run a successful fitness studio—it’s almost done and I’ve started having discussions about publishing.  This means I’ll be able to increase my posts pretty soon.  Good times!

Until then, stay on your toes!

Buying Customers: Revolutionary new rules for you to get more customers with far less money, Brad Sugars

 

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