If you’ve been following along in this series, we’re going to get right to Law #3 from the 12 Laws of Online Marketing with Business Blogs, RSS, and Podcasts. If you missed earlier installments to this 13-part series, you’ll want to go to the Marketing With Business Blogs category to catch all the other laws.

A common question we get from our business coaching clients about business blogs, podcasts, and RSS applications is the ROI (Return on Investment) you can expect. This is a personal question that is unique to your industry and business goals, and it’s one that really requires significant analysis to determine what metrics you’ll even track. But what I can share with you today in Law #3 should be the #1 determining factor in how much time, money, and effort you budget for your business blogging.

Law #3. Know the Lifetime Value of your clients

Lifetime Value (or LTV)… sadly many businesses have no idea what this means. And if they know, they don’t understand how to calculate this crucial figure and how to put it to use to literally squash the competition. While there’s no way for me to effectively show you how to harness the full force of this extraordinary concept in a short article, I can explain lifetime value for you - simply and clearly, and then we’ll relate it to your marketing with business blogs.

Lifetime Value defined by example

LTV is defined as the total dollar amount your average client purchases over the entire period (life) that they’re likely to do business with you.

You can use actual sales figures from past years to arrive at an exact figure, or you can estimate. Either way there are some strategies for making your estimates more accurate, but for the sake of brevity, let me share a quick example using actual historical numbers.

Let’s say that you’ve determined that your clients stay with you an average of three years and you currently have 300 loyal clients. Your net profits over these past three years totals $780,000. The Lifetime Value = $780,000/300 or $2600! So each new client you can get and keep is worth an average of $2600 net profit to you over the average client life of three years.

Now, here’s why lifetime value is so important and how you can use it to outfox your competition in your off-line and online marketing.

How to use LTV to improve your off-line marketing

As an example, let’s say you run an ad in a professional publication that costs $1,000 and you get 35 sales at $25 per sale. That’s a total revenue of $875 (35 sales X $25 each). On the surface that doesn’t even appear to even cover your costs. Most businesses would consider these results a failure. But once you understand how to apply the LTV principle, you will not.

Instead, you’ll see that for every $28.57 per client you invest ($1,000 ad yields 35 clients) — you get a $2600 return. And that’s not even counting on improving your service or product to increase purchase frequency or the amount of time a client stays with you!

I don’t know about you, but I’ll take as many new customers like that as you can find me!

How to use LTV to improve your online marketing with business blogs

One of the biggest hurdles that business owners need to overcome when it comes to marketing with business blogs is the amount of time they think it will take. It’s a real concern and something that needs to be addressed objectively using real data, not subjectively by “feeling” or “thinking.” This is where knowing and understanding the LTV of your clients presents itself as an indispensable tool.

In our Marketing with Business Blogs multi media coaching course we provide significant guidance that helps students develop their business blogging strategy. But for this article let’s use a simple example to show you how you can use LTV to help budget your time and money when it comes to business blogs.

Let’s continue with the example from above, and assume that your LTV is $2600. And let’s say that you’re real conservative in estimating the returns you’ll get from marketing with business blogs, say an average of two new clients per month in the coming year. That means you can spend up to $5,200 (in time or money) to get those clients and breakeven.

But we know you don’t want to break even, you want to make profits on every client you bring in. So let’s just take one quarter of that total and say that your business blogging budget would be $1,300 per month. If it’s your actual personal time that will be dedicated to business blogging, and you value an hour of your time at $100, you can start by budgeting 13 hours per month to your efforts. If it’s actual hard cash that you have to pay to an outsource agent or someone on your staff, you now have a numerical benchmark to make things simple. WOW – pretty cool, huh!!!

Success rooted in simplicity

The reason I am so passionate about this principle is simple. It can literally transform your business or professional practice into a client-focused, profit-producing powerhouse!

Among the many practical applications this law has, it has a powerful intangible impact on your philosophy of doing business. It will free you to give more to your clients than they expect. Plus you will never feel that you are losing money when you offer promotions or FREE products or offers.

In 1992 when my business coach showed me this powerful principle, I was blown away. It literally revolutionized my approach to marketing… and to client service. It prompted me to maximize my marketing by going online with a business that delivered 100% of its services off-line. And this law equipped us to boost our profits by 60% in one year and left our competitors dazed and confused. I’d like the same for you!

I can guarantee you that once you realize clients are actually an ongoing revenue source rather than just part of “today’s sales,” you’ll reap a profit windfall while at the same time exceeding your clients’ expectations. When you combine the understanding of lifetime value with the online marketing methods of business blogging, RSS, and podcasts you’ll have a decided advantage in the 21st-century marketplace.

In part five of this series, your digital business coaching will continue with Law #4 of the 12 Laws of Marketing with Business Blogs. We’ll take a good look at leveraging all your business blogging efforts for healthy list growth and increased profits.

Learn how to unleash the maximum marketing power of business blogs, podcasts, and RSS (in any industry, profession, or niche) with Marketing With Business Blogs™.

John-Paul Micek is a published author and weekly columnist for the business section of the Honolulu Star Bulletin. He’s known as the “Click-and-Mortar Business Coach” by business owners around the world thanks to members of the Business Owners Coaching Club™.


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