As my MBA program winds down to an end, we’re taking more advanced marketing classes. We had one this past weekend that was a “deep dive” into customer loyalty and how little differences in client retention can translate to big differences in practice profitability. In the corporate world, marketing teams focus a lot of energy on calculating Customer Lifetime Value (CLV) because this is a critical number.
Without going into the math of how CLV is calculated (there’s a great article here for those of you who are curious http://en.wikipedia.org/wiki/Customer_lifetime_value ) suffice it to say that not all clients are created equal. If your marketing and advertising expenses are such that it costs you $100 to get a new client through your door but they only spend $75 before they leave, you’ve lost money. On the other hand, if you spend that same $100 to attract a different client and they stay for 5 years, they may spend thousands of dollars at your practice. The key here is that the longer a client stays with you, the more valuable they are to you. Here are some statistics that bear this out: (more…)