Working Out Customer Lifetime Value And Why It Matters by Chris Burgess

Knowing your CLV (or sometimes shown as LCV) is a really great comfort blanket in many ways – it allows you to make really rational decisions about how you let people join your business and how much you are willing to pay to attract them.

Last week I shared with LTB members that between Boxing Day and Jan 31st I generated 88 new clients (not leads) and, very rightly, a few people pointed out that “It’s easier to get people signed up if you are giving things away for free”.

My biggest rationale behind allowing people access to Free trials is that our conversion from FREE into PAID is really good, and not just that – Our lifetime value of clients who came in on free trials is really high.

Here is a really good example for you:

Client S joined my gym in November 2017 on a free 7 day trial.

She then joined Semi Private training at £99 for month 1.

She then stayed as a full fledged member at £159 per month.

In January 2018 she brought in her husband to train with us, he has been with us since then and both are on our couples rate of £121 per month.

Client S is VERY clear… She would not have tried us out if it wasn’t for the 7 day free trial.  (She joined because she couldn’t tie her shoe laces and felt embarrassed by her double chin).

The advert that Client S joined on cost us £11.90 over 4 days.  Since then she has…..

Purchased clothing.
Referred 4 more friends to us.
Given us permission to use her image in adverts that have since brought us in another 41 members.

In revenue that Client S has paid to our gym herself she has a CLV (so far) of well over £2000. If you add in the referrals (some people do, some people don’t), her CLV is now over £5k.

So the CLV has more than justified the investment of £11.70 ad spend, 3 free training sessions and a week of support.

Of course that is a “Highlight reel” example. So what we now do is look at all members who have joined our gym because of a FREE trial.

Our conversion from Free to Paid is 88%.
Our Average length of stay after someone starts paying is 10 months.

BUUUUUT we only started offering free trials in November 17, so that 10 month average stay will continue to increase.

We keep CLV stats for every access point into our business.

Free trials – If people convert to paying.
Referrals – How long the referred person stays.
Paid Trial – How many people convert to memberships and how long they stay.

This means I can put a genuine Monetary value against EVERYTHING We do.

Here’s why it’s a comfort blanket…

I know that I usually have to spend £40-£60 every time I advertise in order to get 3-4 free or paid trialists (I might get, and usually do get, loads of leads in this time, but ACTUAL BUMS ON SEATS is all that really counts).

But if for every £40-£60 I spend I get 1-2 “Client S’s” is it worth it?

In fact if I had to spend £1000 to get 1-2 “Client S’s” would it be worth it?

Here is a task for you

Create a spreadsheet with columns for the following:

    • Client name
    • Date joined
    • How many months they have been with you
    • Average spend per month
    • Total client value
    • “Reason for joining” – Here you can even add the link to any adverts that you ran

I absolutely guarantee you that if you do this, it will give you confidence in what you should do more and less of when it comes to your offers, your ads, and your growth plans in general.

I don’t fear free
I don’t fear low barrier
I don’t fear higher price trials

Simply because I have a comfort blanket for all of them.

 

If you want to learn more from Chris there are courses on marketing, growing a client base and building a brand as well as webinars on consumer psychology all available to LTB members.  Sign up for your 2 week free trial here