Customer Lifetime Value Explained – How to Boost Referrals & Profits Fast!
Customer Lifetime Value Explained – How to Boost Referrals & Profits Fast!
Customer Lifetime Value Example for a Plumber
Average Sale Value: $1,018
Plumbers in this example have an average sale value ranging between $200 and $3,000, averaging out at $1,018 per sale.
Average Repeat Sales Over Time: 5.1 sales
On average, a customer makes 5.1 purchases over a 5-6 year period.
Referral Rate 43.3%
About 43.3% of customers refer others, meaning almost half of the customers are likely to bring in additional clients.
Total Lifetime Value Calculation
Base Sales: $1,018 (average sale) x 5.1 (average purchases) = $5,191.80
Referrals If 43.3% of customers refer new business, this adds significant value to each customer’s lifetime contribution.
Estimated Customer Lifetime Value: Approximately $8,023
The lifetime value of a customer is something your competitors may understand that you don’t. You may have a competitor in your city or business who seems to be progressing rapidly, leaving you wondering how they're doing it.
They likely know this formula: the lifetime value of a customer. Once you understand this, it allows you to build momentum in lead generation and business growth through your internet marketing efforts.
Let’s dive in. I’ll explain what lifetime value is, how you can calculate your particular lifetime value, and I’ll provide a link to a calculator for working out your exact lifetime value and using it to your advantage.
For this example, let’s consider plumbers. From a sample of 19 plumbers, the average sale value ranged between $200 and $3,000, settling at an average of $1,018. Over a period of five to six years, plumbers typically see about 5.1 sales from a single customer, though this can vary between one and twelve sales, averaging out at 5.1.
Another important consideration is the referral rate, as customers refer other customers. In this case, the referral rate was found to be 43.3%.
If you’re a plumber, when you bring on a customer, it’s not just about the value of the initial sale. The whole lifetime value of that customer could amount to $8,023 over a five- to six-year period. While this figure isn’t profit, it’s what the customer could contribute over time.
The referral factor is considered here as well. Just one customer paying around $8,000 over time can significantly impact your business. And, of course, they may refer others, adding even more value.
So, if you can bring on new customers quickly, you build up a referral rate and generate more referrals. Many businesses operate with a “onesie-twosie” approach, not building any momentum. However, if you think of customer lifetime value as a snowball, gaining momentum is like rolling it downhill, gathering more snow and growing faster as it goes.
The more customers you acquire, the more referrals you’ll receive, leading to a consistent flow of leads over time. You’re no longer just relying on new business; your existing customers are referring you, creating steady growth.
Investing in lead generation—whether through your website, advertising, or Google listings—can provide the momentum needed to make this strategy work for you. Rather than dabbling, commit some budget to start seeing these results.
If you found this information helpful and want to calculate your specific lifetime value, there’s a link in the description with a calculator to work out your customer lifetime value. I’m James Roberts from Kingfisher Digital, and I help business owners get more leads and referrals.
