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The lifetime value of your client is the profit you receive from an average client, over the entire time they see you. Since we are talking about profit, it is your income minus expenses, like sheets, laundry, rent, phone, etc. Start by figuring out on average how much profit you receive from each client transaction. For example, you charge $52 per massage, minus the costs of providing the massage (sheets, lotion, etc), you profit by $42 per massage. Then figure out on average, how often each client comes back a year. Lets say that on average your clients return four times a year $42 x 4 = $168 Now figure out on average how many years your clients stay with you. You figure out that your clients on average stick with you for three years. $168 x 3 = $504
So your lifetime client value is $504. That is a lot more than your $42 profit from the first massage. And realize that this is an average. Many of your clients will be worth much more than this. In most cases, 20% of your clients will provide you with 80% of your income. So, how much would you now be willing to spend to get each new client? Theoretically, you could charge nothing on your first massage (take a loss of your expenses), and still realize a $452 average profit per client over the next three years. Wow! I am not at this point recommending this. Just know your average client value. This number is necessary to see if your marketing is profitable. The next step is to determine how much it is costing you to get new clients. Let's say you run an ad in the newspaper. Each ad costs $250, and brings in three new clients. You divide the cost of the ad by the amount of people it brought you.
In this case the cost of each new client was $83. That is pretty expensive. But you know that the average value of each new person who sees you is $504. So subtract $84 from $504 which means you are on average going to make $421 per new client.
This is your estimated Return On Investment (ROI). So this advertisement would still be profitable. But you will be able to achieve a much better ROI than this with your marketing promotions. It is a simple as this. If you know these numbers, and you have profitable massage promotions, then your marketing budget is mostly defined by how fast you want to grow. In real life it is also defined by how much you have available to invest, your cash flow, and how often you can create the same results with your massage promotions. Once you learn how to create many different profitable massage promotions, you will have the ability to grow much faster than you would expect (often faster than you are prepared for). Back to your first questions. Should you give a big discount coupon? You can now decide this for yourself based on your understanding of your Lifetime Client Value and your expected return on investment. (There are some other important things to consider about massage coupons and discounts on this page: Massage Coupons & Discounts). But if you are marketing to a wide crowd, that is not very targeted, be wary of giving big discounts. You may just attract a lot of people looking for a one time cheap massage. More on this later. What if you don't have many clients yet, are just starting, and have no way to figure out your lifetime client value? In some respects you are very lucky. You can do it correct from the beginning. To start you will have to make your best estimated guess about your potential Client Lifetime Value. You can also talk to other therapists who you know and respect, and base some of your initial figures on their experience (although few therapists know these figures). You may not be able to know for sure if a first time massage promotion is going to be profitable. They key is to stop it if it proves unprofitable. Change it before you try it again. So far on this site you have learned a lot: Client Problem Solving, client benefits, targeted marketing, the three ways to grow, and how to budget for profit. Now it is time to get our hands dirty and learn the most important piece of every single massage promotion and marketing piece - Massage Marketing Tip #1 - Use Headlines
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