Is the Lifetime Value of a Customer Really Infinite?

  • Nov 3, 2011

Determining the true lifetime value of a customerIs it Time to Re-Think How You Look at Customer Referrals?

Austin, Texas: I read the book, The Referral Engine, by John Jantsch last night, and was struck by one of his ideas: “The lifetime value of every single customer is unlimited when you factor in a customer’s ability to make referrals.”

What a deep, thought-provoking concept from a completely thought-inspiring book.

Any good marketing person tries to determine the lifetime value of a customer, but in the past, it was usually based on what a particular client would purchase over their lifetime. For example, if a person ate out at a particular restaurant once per month and spent $100 on each visit, the yearly value of that customer was $1200, and over 25 years, the lifetime value might be as high as $30,000 – for that one single client.

Knowing their lifetime value would affect how much you might spend to advertise and market to that person and how much you might spend to keep them happy and loyal.

In any loyalty program, prizes and rewards are set up to cater to those customers that might become the most fervent clients.

However, with this new paradigm shift, every single customer can be viewed as a source for constant referrals, making their “lifetime value” much greater than their individual purchases over a set period of time.

Whether you are a roofer, new car salesman, insurance agent, clothing retailer, etc., think about referrals.

Are you asking for them?

Are customers referring you on their own?

Are you incentivizing referrals?

Are you making it easy to refer your business?

Are you making it so that referring your business adds value to the referrer?

Are you value-adding your service so that referring you is second nature, a joy to be shared?

Think about how you can improve your referral percentage by thinking of the infinite customer lifetime value potential. The book is full of ideas that can inspire new thinking in terms of continuous customer referrals.

What are you going to do to drive more referrals?


  • Category: Blog, Referral Incentives
  • Tags: customer lifetime value, encouraging referrals, incenting, incentivizing referrals, loyalty program, referral incentives, referral programs, The Referral Engine