The James Group

Branding Agency/ Full-service Advertising Agency

Marketing Best Practices
ROI Marketing
To do ROI Marketing, each business must first know its lifetime value of a customer. This magic number explains how much one should be willing to spend to acquire a new customer profitably. Every business has a magic number. Do you know yours?

The formula looks scary, but we've made it even simpler with a free downloadable Excel spreadsheet available here:

The James Group Customer Value Spreadsheet
DOWNLOAD NOW

Instructions:
You can simply enter in designated boxes four variables and instantly understand the lifetime value of a customer. Each of these variables, you or your financial team already know (being within 10-15% is good enough for directional purposes):

  • Average annual revenue per customer.
  • Average gross profit margin before marketing expense (EBITDAM).
  • Cost of capital.
  • Average number of years a customer is held.

This Net Present Value (NPV) equation is calculated before marketing expenses to show what you can afford to spend to acquire a customer and still be profitable. The NPV number is discounted back to today's dollar, so you can compare apples to apples when the marketing investment will occur.

Read further on how to do ROI Marketing using the Lifetime Value of a Customer


The James Group Customer Value Spreadsheet
DOWNLOAD NOW