Lifetime Market Value

For most healthcare providers, thinking in terms of Lifetime Market Value is new. In a system where everything we do costs money, it is essential to have an understanding of the issues Mr. Straight brings up below.

Lifetime Market Value can be applied to any business, healthcare or otherwise. How many times do you get coffee in a week? I probably buy a coffee 3-4 times a week. I'm simple and only get the cheap, small kind. The coffee costs $1.55 and I also tip the servers. I'm out of town a bit, so let's say I buy my coffee at my favorite store at $1.55 each time, 3 times per week for only 40 weeks out of the year. I'm worth at least $186 per year to the coffee store.

We can complicate things with up-sells and cross-sells, all the tactics they use as a business to get me to spend more money when I'm there, and I often do. My real value might be closer to $250-$300 per year. And I bring friends sometimes or my kids or wife, and even if I'm not the one buying that day, the coffee store still gets their revenue.

And the servers? If I only tip $0.45, the change left over from my coffee purchase each time, then I'm worth at least $54 to them this year, too. And I often leave them more than that.

So, I'm worth a base of at least $350 per year to the coffee store and their employees. But I bring others. I buy a sandwich sometimes. I'll buy my kids a yogurt or milk, or sometimes the fruit salad, which all serve to raise my value to the store. And I'll go there for the next 5 years, as long as my office is where it is. So, I've turned my $1.55 a day habit into a Lifetime Market Value of about $2,000 for this one store. And this started out as only coffee, and the small, cheap one at that.

You can use this type of analysis to take a look at pricing, services offered, how much an average client spends, how many referrals you get from clients, and then make better decisions about where to devote your resources.

A great article that addresses this in the context of customer retention is at http://www.marketingprinciples.com/customer-retention-plan. Staying in touch is a huge step toward retention.

Do the exercise for your practice, whether you are an internal medicine physician, an orthodontist or a podiatrist. Estimate the services you provide to an average patient over the course of treatment or on an annual basis. Multiply by the number of years, recurrences or new care episodes, and then multiply by the number of friends or family they will send to your practice. Now think about what you do to stay in touch with that patient and what you can do to help them recommend you to their friends and family.

Marketing and maintaining contact doesn't have to be expensive, it just needs to be focused.

Please contact me with questions or comments on this or any of the articles at sturdy@rocketmail.com.