Most marketing texts offer a nice discussion about why the Lifetime Value of the Customer (Or Customer Lifetime Value if you prefer that term) is a critical consideration in any strategy.
The bottom-line is that it’s just so much more cost effective to grow business from existing customers than to try to go out and get new ones. When you grow the business of the existing customers (whether the frequency of their purchases, the size of the sales, or grow share of customer through the sale of additional or new product offerings), the margins are virtually 100% because there are no acquisition costs associated with that business.
Plus, any business they refer to you is also essentially at a 100% margin because, again, there are no acquisition costs. So it’s not just a nice-sounding thing to say that customers are our greatest, most important, and highest-yielding asset. It’s something we can prove with numbers. They’re our entire future! Customers ARE the answer!
“Captive customers mean stable revenues and less money and effort on marketing, especially if they make it their habit to put in a good word for you with their friends every so often. Allegedly rival products are less tempting to captive customers; therefore, you get more time to respond to competitors’ innovations. They are not so price-sensitive; therefore, you can afford to charge them a little more, and so forth.” – Dan Herman, Outsmart the MBA Clones