Why Customer Value Optimization is The first Step in Growing Your Business

Customer Value Optimization was a term that you just didn’t hear much back in the early 2000s when I started my first business.  I had several business ventures that I had started and a hand full of companies that I worked with… Most of them didn’t work out too good.

It seemed that most companies were afraid of investing money into marketing.  I find this is still true today.  It’s almost as if business owners think they are wearing a badge of honor when they only work thru their networks and referrals.  They proudly admit they don’t market, they do only referrals and thru word of mouth.

And while referrals are a  Powerful tactic in the overall strategy of Customer Value Optimization, it is the Last stage in it.  Sure, Referrals and word of mouth leads are easiest to close, because they already have some type of trust in you, they heard about you from someone they trust. 

Only problem is, What happens if this well drys up? 

What happens if you need to grow you revenue to hire more help, and expand your reach in the market?

  How will you generate more Referrals when you tap out your network?

Most importantly, what happens when, (not if) the market turns or we have a recession or another shelter in place?

What is Customer Value Optimization?

Customer value optimization is the process of building relationships while moving towards selling low value offers up front, and continually adding value to that client.

This process includes repeat selling over and over higher value offers to the same client and eventually getting repeat customers and referrals.

This process is excellent for business development and growing your business.

If you can if imagine… What IF we had a contest of two companies and one of the companies worked solely through referrals and every customer that they had sent  three referrals…

And for the other company, they worked on developing systems to build relationships in cold markets, where people didn’t know who they were or what they did.

It might take some time initially to build the systems and content in the marketplace,

and earn people’s trust, but when done right,

and a low value offer is presented to the new prospect up front, this can sometimes cover your marketing costs. And you also have systems that automate following up and offering them newer products at a higher value.

Now let’s just say that we ran this contest for a year. On one hand you have a business owner that gets three referrals for every customer and this business owner works very hard networking and generates let’s say hundred clients and 300 leads that year.

If this business owner wants to grow there’s two things that must happen they have to increase the amount of leads and sales that they get to increase revenue to hire help …

and sometimes this is very hard when you don’t know when you’re going to be getting sales, you don’t really know when you get the referrals, you don’t have a lot of control over this method.

Now the other person for instance they have a simple video, blog, or pdf that explains what they do for their clients,

and they include a case study showing the results that they get their clients and they post this on let’s say Facebook

and they generate a lot of people downloading these free types of material, most the people that download these brochures are to be considered a decent lead.

Then you could offer them a very low ticket maybe consultation or assessment or some type of service that covers the cost to acquire a customer.

This accomplishes two things. One it converts a cold prospect into a buying customer.

The other thing accomplishes is that it covers the cost of marketing.

Now imagine if these two clients sold something for $1000 a piece. The first example would have sold $100,000.

Now the second example would have designed a system for finding prospects and converting them into low-cost customers. They would have sold them maybe an offer for $500 and then $1000.

If the cost of acquiring those customers was $100,

and they sold them another item for 500 and then 1000 they would have generated  $150,000 minus the 10,000 they would have spent to acquire the customer.

This means they would have made $40,000 more than the person that just worked off referrals.  If it cost you $100 to get a $1,500 Sale, How many $100 would you invest in your marketing?

Now let’s say that these two business owners in the second year are getting ready to see what they can do to grow their business.

The first company needs to at least do what they did last year to make what they made and if they have the leads to scale it will cost money out of that hundred thousand to grow. This company will more than likely not have systems in place that move prospects and customers through a value ladder or multiple sales to continually sail over and over again.

The second business will have systems in place that turn cold prospects into warm prospects then move them through a series of processes that turn them into paying clients repeat customers and then referrals.

They have a system that can afford to outspend their competition to acquire a new customer.

This is the main goal for customer value optimization.

The company that is willing and able to outspend their competition will always have an advantage over the companies that do not.

What are the stages of the Customer Value Optimization Strategy?

In the past few years most people have a very static outline of what the customer value journey looks like.

The first stage of Customer Value Optimization is determining if the market that you are serving is wanting the product or services that you offer.

The second step would be determining how you’re going to drive traffic to your first entry point of converting cold prospects into warm prospects.

This basically means that you’ll be giving out a free consultation, free brochure, some type of interaction between your business and a cold prospect that starts the conversation.

Don’t make this too complicated, you want to do some research and figure out what your markets looking for what kind of pains they have or what kind of solutions that they are looking for.

Put this in a really simple PDF file, and design of Facebook add, drive people to a landing page where they can download it,

and then make sure that you have a system for following up with that person and moving them to the next stage of making a purchase.

Sometimes it is best to run your ads before you build your follow up systems or programs, just to make sure your ideas are what the market wants.

This doesn’t have to be very hard this could be a couple of phone calls it could be an auto email responded it could be Facebook messenger chat bot.

The key here is to have some type of automation that you can leverage. Getting on the phone with 1000 people a day is can be very difficult, but if I have an auto email responded or a Facebook chat bot that qualifies each person, and then gets me on the phone with people who are ready to make a purchase, then I am positioned to win.

Why Are These Stages So Important?

Most companies fight aggressively to get new leads and sales.  It just is common sense. 

Most business think that they need more leads and sales to grow, and that is true. 

The problem is, the customer lifetime value, or profit you make off of each client doesn’t increase much.

  So what happens, and pay attention here, is that you have more work to get done, with the same profit margins, and that becomes a larger hamster wheel you are running on.

Now, I know that if you are building your business right now, and you are around your first six figures, 100-300 grand a year, you may not really see what I’m talking about, but once you get over 500-800 grand per year, you have to start increasing your lifetime customer value so that you can increase the profit you make per client,

and start having more money to grow you business.

When you have more profit per client, this allows you to scale your business without borrowing money or trying to grow extremely slowly.

Customer Value Optimization helps you accomplish this.

Why Customer Value Optimization is Crucial for Your Business

The CVO process is based on the same type of process to build relationships.  So,  like the business owners that only work on referrals, the CVO process starts with building relationships with prospects that don’t know who you are or what you do.  This allows a business to expand their market at a controllable pace. 

So once you build a relationship and they know, like and trust you,

you sell them a low-cost (Or High Ticket if you have proof or a beta group), high value product as fast as possible. 

The goal of this is to cover the cost of marketing. 

Then you continually sell them over and over again.  This accomplishes raising the lifetime customer value of each customer, and the final goal is to have each customer giving you testimonies and referrals.

The reason why Customer value optimization is so important to your business, is because, until you have a CVO strategy,

it is very hard to grow to the point of hiring and scaling your marketing and sales efforts.

Profit per client is very very important to reach this point.  Because until you have a system that increases your profit per client, you are in a sense just building a larger hamster wheel for your business.

To learn more about the customer Value optimization principle, and master funnels, You can check out another Blog post that explains it, Or book a  Free Strategy call with me and we can look at what you are currently doing in your business right now, and see

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