The lifetime value of a client

Most lawyers invest more time and money in acquiring new clients than in retaining existing ones. And yet the cost of retaining clients is a fraction of the cost of acquiring new ones.

If you want your clients to keep coming back to you, the first thing you need to do is to realize that it’s worth making them happy.

And it is.

Your average client is worth so much more to you than what they pay you for their initial engagement. Their value is an average of all of the fees they are likely to pay you in the future, over their lifetime as a client.

Some clients won’t come back because they don’t need you again, but others will hire you frequently. Some will have small cases, others will have big ones.

And every client can send you referrals, which also count towards their average lifetime value.

Once you understand that the client who pays you $5,000 this year might contribute an average of $150,000 to your bottom line over their lifetime, you will appreciate why it is worth investing in them.

If you only look at the $5,000, you might resist the idea of spending $50 per client per month to stay in touch with clients via a newsletter, birthday cards, and small gifts. If you look at their lifetime value, however, you might look for ways to invest even more.

Consider the cost of acquiring a new client. Take everything you spent last year on anything that could be considered marketing (and don’t forget the value of your time) and divide that number by the number of new clients you signed up.

If you spent $2,000 to bring in one new client who pays you $150,000 over their lifetime, you did well. So I’m not saying you shouldn’t try to bring in new clients. Just that it’s more profitable to keep your existing clients coming back.

It’s also much easier to get existing and former clients to hire you. They already know you and trust you. You don’t have to find them or convince them that you can do the job. If they need your services and you kept them happy in the past, you don’t have to do much to get them to hire you again.

The most effective marketing strategy for any professional is to make an ongoing effort to keep their clients happy. Find out what they want and give it to them. Encourage them to tell you how you are doing and what you could improve. Find out what they expect of you and do everything you can to give them more.

Because over their lifetime, they are worth a fortune to you.

The lifetime value of one-time clients

I got an email from a marketing expert I follow who asked us if we would prefer to have a customer or a buyer on our list. What’s the difference? A customer is someone who buys something or hires you once and then goes on their merry way. They might come back, they might not. A customer, on the other hand, is someone who makes a custom of buying from you, “because of the trust, respect, and loyalty they have for you.”

So, customers are better than buyers.

Repeat clients are better than one-time clients.

Does this mean lawyers should only practice in areas where clients make a custom of hiring again and again? Should we choose business law, for example, with lots of repeat business, over consumer bankruptcy where the client might hire us once in a lifetime?

Not necessarily.

Someone who “buys” from you once and never again is potentially just as valuable as someone who hires you frequently. They should be courted and nurtured. We should build relationships with one-time clients, even if they never hire us again.

The lifetime value of a client is only partially measured by the fees they pay us. There are many other ways they can deliver value and help our practice grow. They can provide

  • Referrals
  • Website traffic
  • Recommendations and positive reviews
  • Introductions to other professionals, meeting holders, editors, bloggers, etc.
  • Invitations to networking events
  • Feedback about our services (so we can make improvements)
  • Information about our target market or community
  • Likes, re-tweets, and sharing of our content
  • Forwarding our emails to others in our target market

They can send us business, help us build our list, and otherwise help us bring in more business. In fact, what a client does for us outside of paying fees could easily be worth far more than the fees they pay. In terms of referrals alone, some clients who never hire you again could be worth many times the fees generated from clients who hire you again and again.

In fact, someone who never hires you could be worth far more to you than someone who hires you repeatedly.

The lesson? Treat everyone as though they are your biggest client. Provide extras. Help them every way you can. And stay in touch with them, before, during, and after the engagement or case.

You never know what someone can do to help you.

The Referral Blitz is one way to get clients and contacts to help you build your practice. Click here for details.