Future Value of a Customer Assumptions Average Initial Product/Service Price Net Profit per Customer Average Follow-On Product / Service Price Net Profit per Customer Probability of Future Purchases Average Update / Service Contract Price Net Profit per Customer Probability of Purchasing Ongoing Update/Service Term: Years they are likely to be a Customer Number of Repeat Sales per Year Number of Likely Referrals per Year Cost of Money / Inflation Current Number of Customers in Database Cost to Acquire an Existing customer Customer Base Turnover / Attrition Rate Assumptions Calculations Revenue from Initial Product / Service Sales Net Profit Revenue from Ongoing Update / Contract Services Net Profit Revenue from Referral-Generated Business Net Profit Total Revenue Per Customer Total Profit Per Customer Net Present Value of Future Revenue Net Present Value of Future Profit Current ROI on Customer Acquisition Net Present Value of Customer Database $50.00 $30.00 $35.00 $20.00 20% $30.00 $20.00 10% 5 2 3 8% 25,000 $50.00 20% Year 1 $56 $33 $5 $4 $167 $100 $228 $136 $363 $215 329% $4,615,492 - Price of the first product / service a customer is likely to buy - Price of add-on products / services - Likelihood of customer buying a follow-on product / service © 1999 JIAN Tools For Sales, Inc. All rights reserved. If you steal this, we will sue - If there is on-going service contract - Likelihood of customer buying any on-going service - How many times per year would a customer likely buy a product or service? - Additional customers who buy because of the original happy customer - Estimate the interest rate or investment return you would earn on your money - How many customers can we mail to today? - Estimate the rate at which you must replace lost customers every year. - Total Marketing Costs divided by Number of Customers (from Income Stateme Year 2 $11 $6 $5 $3 $34 $19 $50 $29 Year 3 $11 $6 $5 $3 $34 $19 $50 $29 Year 4 $11 $6 $5 $3 $34 $19 $50 $29 Year 5 $11 $6 $5 $3 $34 $19 $50 $29 Total $100 $59 $25 $16 $301 $176 $426 $252 - The total revenue from a customer in today's money - The total profit from EACH customer in today's money - Return On Investment, based upon the above Customer Acquisition Cost - Net Present value of all potential future sales to our growing customer base.