In my many years of Sales and Marketing, I've met many CEOs and business owners who don't have much clue as to what Customer Lifetime Value is, much less its importance and impact it has on their bottomline. To most of them, what matters most is to increase revenue by continuously acquiring new one-shot customers.

This's one of fatal mistakes that many business owners make; it's a sad scenario, but it's also reality. Let me tell you something: it'll cost you 5 times more to attract a new customer than it is to bring one of your past customers back to you.

I don't know you personally, but if you're a smart business owner, you'll understand that every cent you invest in advertising is going towards acquiring new customers. You'll also realise that once you've acquired customers, you just can't afford to let them go.

-------------------------------------------- So what's Customer Lifetime Value? --------------------------------------------

Customer Lifetime Value is defined as total value, in monetary terms, of your average customers spanning entire period that these customers are likely to do business with you. It's potential contribution of your customers to your business over a period of time.

Here's how to calculate your Customer Lifetime Value:

1). Let's say you've 2,000 steady customers and these customers remain with you for an average of two years; for past two years, your net profit was $700,000.

The Customer Lifetime Value can be calculated as: $700,000/2,000 = $350.

What this means is that over an average customer lifespan of two years, each new customer you could acquire and keep is worth $350 to you in profits.

2). If you don't have actual figures, you'll have to estimate. As Customer Lifetime Value will have a significant impact on your bottomline, my advice is that you be prudent and conservative in your estimation.

------------------------------------------------- Why is it so important to you and your business? -------------------------------------------------

What every Toy Marketer knows:

Toy marketers have known for years that focus in a toy commercial is not so much on their new product, as much as it is on facial expressions of child. They're showing absolute joy and delight of playing with that toy. Often images in mind of child who is viewing commercial might evoke a sense wonder, adventure and excitement. Sometimes, a toy marketer may aim much deeper psychologically by showing child in their commercial, enjoying their toy with either Mom or Dad sitting on floor playing with him or her. The child viewing program may even desire that toy more simply because they think that "if they only they had this toy", their Mom or Dad might take more time to sit down and play with them too!

Emotional Content in Traditional Marketing:

In example above, a TV commercial does not focus on parent...they are selling to child. However, selling a toy on web, in an online toy store, is different in aspect that you are actually selling to parent (a child does not have a visa card to place an order). The benefits of a toy that appeal to parent will be things like, it's safety features, fact that it "educational". However, focus on appealing to child might zoom to top again in a children's entertainment site. If you want to sell a toy, you must make it desirable to have on child's level. Most of us who have kids, know impact and drive that a child can have towards getting something from a parent. When a child "wants" something, that child will persistently find a way to go after that item until usually, parent often gives in and buys it.

What about silly characters brought to life in a fast food commercial and various toy giveaway promotions? Certain fast food restaurant marketers know that children have power to drag their parents to local fast food place based on fact that they can get this neat toy. All of this starts by a commercial in which that tiny little toy is made to appeal to child's emotions. Is this not true also with certain breakfast food cereals and "free prize" or "game" you get in every box? Of course as we grow from children to adults, we are not influenced by emotional media elements anymore....or are we. Let's look now at a few actual examples from my experiences on web.

On The Web, Emotional Content Influences Peoples "Buying Decision." Actually, with web being a multimedia experience, we have lots of opportunity to work with emotional content. After all, your visitors are just human beings too? We're really no different online than offline. We have an important emotional side of us that can be appealed to. Here's what I have learned from my client successes.

--If you are trying to sell a baby crib, but nobody is buying it,...put a cute little baby in crib and PEOPLE WILL BUY IT!

--If you are relying on graphics, photos, animated gifs or any type of images, you want a combination of quality with uniqueness. Will your image make your audience smile or will it make your audience cry? Where might it be appropriate to make your audience cry? Actually, all it takes it right scenario.

Example: I know of several businesses who are utilizing messages based on events which occurred September 11 in US. (The Sept. 11th tragedy in US). In these examples, websites selling products are appealing to visitors sense of patriotism or they may deliver messages of hope and inspiration. As important as these points are, they are also making good sales. In case of Sept. 11 example, some sites are selling but also contributing a portion to cause.

--This leads to another thought....be very mindful of current events and current interest topics that you hear about on media. Sometimes most obvious strategies can be staring us right in face. Be mindful of all media topics and in many cases you can bring about some good out of what would otherwise be missed.