What is the value of a client? When considering investments in marketing, including Web sites and online promotion, it’s important to know just how much the average new customer is worth.
You might guess that this figure is the value of the contract in question, or, more likely, the profit that can be made on the current project. This view underestimates the potential value of a new client, however, and tends to discourage investment in long-term marketing efforts that can greatly help build your business.
In other businesses, it is routine to value new customers based on long-term expectations of their purchases. For example, magazine publishers frequently spend $50 or more to secure a $20 subscription. Why? Because they know that a certain percentage of these subscribers will renew. In essence, these firms are looking at estimated future revenues.
This approach works in construction, too. Whether you are a residential or commercial contractor, it’s a safe bet that many clients will give you repeat business and referrals if they’re happy with your service. Over time, this future business can add up to many times the value of the initial project.
What percentage of your past clients have contracted for additional projects? How many have sent you new business through referrals? In all likelihood, you’ve realized considerably greater revenues from your average client than the base cost of the first project. Understanding this and getting a clear sense of your specific results is key to creating a rational marketing plan and budget for your company.
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