In terms of dollars, there’s a pretty simple formula to find out the lifetime value of a customer. Check it out…

Average transaction amount multiplied by the number of transactions per year multiplied by the number of years a customer stays loyal to your business.

This formula will spit out a dollar value which will help show you where to improve your business to make it more profitable. Adjusting any of the elements in the formula can have an exponential impact on your profits. It will also help you come to understand just how important it is to keep your customers happy. It puts a dollar value on your customer service (sort of), and also shows you how your relationship with your customers is a vital component to success. Remember, marketing is all about relationships.

As a marketer though, I have to say that this formula only tells one part of the story. The money part. As you know numbers are only one aspect of marketing. This is why many refer to marketing as an art. There are alot of variables in this game, and mastering these variables is what will make you successful. There are many things this formula doesn’t take in to account. How many people is this customer going to tell about your company? What are they going to say (You can be a customer and still have a negative opinion of the business; look at all the folks dissatisfied with Call of Duty: Modern Warfare 2, but continue to give Activision more money)? What about changes in the economy, like the one we’ve been facing for the past few years? How will that affect your business? What is it that makes your customers come back? I could go on, but you get the point.

Customers are the fuel that moves business. Without them, you’re history. In my view, you can’t begin to put a dollar amount on the relationships that you build with your business. I think the lifetime value of a customer is priceless.

What do you think? Comment below or email me at edwardviator@evil-marketer.com

Entrepreneurs drive the business world. They are the ones that take the big risks. They move fast instead of waiting for things to happen. They are way more action oriented than other companies. They have the tenacity and drive to succeed. So why then do so many start up companies fail. There are some obvious reasons, such as the usual barriers to entry; it can be difficult especially if you are trying to go up against the big boys without a tenth of their budget. But I believe there’s more to it than that. I think many entrepreneurs are so excited to start their business that they do so without giving the process enough thought and planning. This is especially true of online businesses, where the start-up costs are relatively cheaper (the cost of a domain is much cheaper than renting an office). Here are some reasons why I think many new bushiness fail…

1. Belief that being good is all that is needed to be successful

I live in a neighborhood where many people know how to cook excellent food. Yet, there aren’t many successful “mom and pop” restaurants. Sure, I see new ones pop up all the time, but they don’t really last very long. Having visited some of these places (hey I’m all about helping local business thrive) I can tell you the quality of the food is far superior to most places. However, quality is just not good enough in this day in age. You can have the best product in the world, but it doesn’t matter if you aren’t taking care of your other business responsibilities. Little things like bringing in customers, pricing strategy, customer service, location, keeping proper hours, etc. Having an excellent product is a definite must, but don’t forget that it’s only one piece of the business puzzle. Remember the basics… play to your strengths and passions, be objective in regards to your business, and seek help from others when you need it.

2. Lack of goals

Let’s face it, this is a problem even for the big companies. The difference is that they can afford to make mistakes, you can’t. One of my favorite movies of all time is “Deep Cover” (yeah, I said it), and there’s one part in that movie where a father turns to his son and asks him what he wants for Christmas. The kid shrugs and says he doesn’t know. The father then says something like “how are you ever gonna get what you want if you don’t even know what you want.” Exactly, I couldn’t have said it better myself. Setting goals is essential in life and in business. Sit down and identify your personal goals. See where they sync up with your business goals (spend more time with your family, more money, etc), visualize what you want to achieve, and then develop a plan to get there. Set up milestones (divide your big goal into smaller objectives), and timelines to achieve these milestones. Prioritize your efforts around these goals and milestones and you will be much more focused on what is important to you. There are rules for setting goals, but I’m sure we’ll get to that in a later post.

3. No process

One of the biggest mistakes entrepreneurs make is that they have no systematic processes for anything. Most of them keep everything in their head, and never commit ideas to paper. Let’s face it, business is complex. If it wasn’t then we wouldn’t have to go to school for years to learn how to do it, and you probably wouldn’t be reading my posts. Put those ideas on paper. Write out your processes, especially for some of the more complex things. This will make it easier for you to identify where things can be improved. Also it makes it easier to train others whenever you get to that point. Remember, a good business needs structure, processes, and people. You need a plan, tasks, timelines, etc to reach that plan, and people to execute it.

There are probably more things that I’m leaving out, but these are the major factors. What do you think? Why do you think so many start-up companies fail? More importantly what can entrepreneurs do to make sure they succeed?