It’s a common question that we ask new customers as it’s important to know how much profit you stand to make from the lifetime of that new customer , and therefore what it is worth investing to get such new customers.
If your business sells goods or services where a ‘one off’ or ‘occasional’ sales takes place, such as say a large piece of capital equipment, or a specific individual contract, then it’s fairly easy to calculate. But if for example a new customer brought you regular repeat business. so let’s say you deliver dog food to homes, and a new order gets you £20 profit BUT you can reasonably expect monthly repeat deliveries for 10 years then the potential lifetime value of that new customer is £2400 (10 X 12 X £20) . In such circumstances you’d probably be prepared to invest more than £20 (the first delivery profit) to attract such a customer?