A customer is not worth just their first purchase, but everything they will bring while staying with you. If you only consider one visit, advertising seems expensive, and you underestimate the cost of acquisition. Estimate how often a person returns and the total amount, and the picture changes.
Why does one purchase mislead?
A one-time sale shows only the tip of the iceberg. A satisfied customer returns again and again, bringing in much more over the year than their first purchase. If you focus only on the first sale, you undervalue each customer and hesitate to spend on advertising as much as you actually can.
This is why businesses that only consider the first sale rarely grow: they save on acquisition where competitors are willing to pay more and capture the customer.
How to estimate a customer's value?
It's simple: multiply the average purchase amount by the number of visits over the time the customer typically stays with you. For example, if the average purchase is 1000, and a person visits once a month for an average of a year, they bring in about 12,000, not just one thousand as it seems from the first sale.
Precision isn't necessary here; the order of magnitude is what matters. Even a rough estimate shows that a customer is worth much more than their first visit.
Why is this important?
To understand how much you can afford to spend on acquisition. If a customer brings in 12,000 over a year, spending 1000 to acquire them is not expensive but profitable. Without this figure, you view customer cost in isolation from what they bring in, and you may cut off ads that are actually paying off.
How to increase this number?
Not by acquiring new customers, but by encouraging returns. The more often a person returns and the longer they stay, the more they contribute, and the more you can invest in acquisition. Reminders and easy rebooking options increase this amount. The same simple path that brought the customer in the first time can bring them back again, and tags for regulars in WhatsApp Business help you remember whom and when to remind. That's how Mate works.
Frequently Asked Questions
What to do if customers only visit once?
First, honestly check if the service is truly one-time or if you simply aren't reminding them. Often, people don't return not because they don't need to, but because they forgot. If the service is indeed one-time, the customer's value increases through referrals: a satisfied customer brings in friends, which is also part of what they contribute.
Do I need to calculate exactly, down to the penny?
No, precision is more harmful than helpful here. You need an order of magnitude, not an accounting calculation: does a customer bring in around ten thousand or around a hundred? That's what influences advertising decisions. A rough estimate based on average purchase and visit numbers is sufficient, while chasing precision only wastes time.
How is this related to customer cost?
Directly: lifetime value sets the ceiling for how much you can afford to spend on acquisition. If a customer brings in 12,000 and costs 1000, the channel is in deep profit. Calculating customer cost without considering what they bring in is pointless: one figure reflects expenses, the other reflects income, and they only make sense together.
What time frame should I use for visit numbers?
For the duration that a person actually stays with you. For some services, this is a year, for others, a few months or three to four years. If you don't have data yet, cautiously take a year and refine later when you see how long customers stay. It's better to underestimate the time than to create a nice but fictional number.
Should I consider costs of the service itself?
For a rough estimate for advertising, you can calculate based on revenue, but it's more honest to subtract direct costs: materials, time rental, commissions. Then you'll see how much a customer brings in net, not just in turnover. At the start, turnover is enough, but when deciding how much to invest in acquisition seriously, calculate based on what actually remains.
