Minimize costs, increase revenue, and retain your customers by finding out your customer lifetime value.
We’re sure you’ve heard the term customer lifetime value (CLTV) before, but do you know what it actually means, or how you can use it to the benefit of your business?
The consumer or customer lifetime value is a great metric for any growing company that indicates the amount of revenue a company can expect from a single customer account throughout the business relationship. It looks at your revenue value and companies that number to your company’s predicted customer lifespan.
In simple terms, it’s a great way to see how much money one relationship is likely to bring you, in addition to giving you a brief overview of how long you can expect your relationship with your consumer to last.
You can follow this simple formula to calculate it:
Customer lifetime value= (Customer value x Average customer lifespan)
And that’s not all. The real benefit behind this is showing you which consumers are most valuable to the company, by truly pinpointing your most loyal consumers and their investments into the company.
How do you make the best out of this information?
1. Boosting customer loyalty and retention
Once you know who your loyal customers are, you’re able to launch retargeting and marketing campaigns to make sure that their loyalty remains steadfast.
The best way to do so is through your customer support and success teams, who are capable of influencing your customer at any point in their journey. They play a critical role in solving problems, offering recommendations, keeping customers in the loop on ongoing offers, and overall doing small tasks that can easily increase your customer loyalty.
2. Targeting your ideal customers
Once you know the lifetime value of a customer, you’re more likely to see when and where they are more likely to spend money. This knowledge is essential in developing a customer acquisition strategy that targets the right customers and provides them with the right offers. In simpler words, you will be targeting new customers with the same profile as your loyal customers, which increases the chances of your newly acquired customers becoming loyal as well.
This is ideal for brands with loyalty programs because loyalty programs that work know exactly the right thing to say or do to get their customers on board.
3. Increasing your revenue
Why is customer loyalty so important?
Because it is what guarantees a steady influx of revenue into your business, and loyal customers served with their favorite products and services are always more likely to spend money than new customers are.
Existing customers are a gold mine just waiting to be discovered, so grab your opportunity while you can.
4. Reducing customer acquisition costs
Harvard Business Review found that gaining new customers can cost anywhere between five and 25 times more than retaining an existing one.
Why waste so much money trying to get new customers on board when you can simply keep the ones you have for longer by increasing their CLTV?
It’s essential your business knows exactly which customers to nurture, because not only will these bring in a massive influx of cash, but they are also going to be the reason you spend less money in the long run.
Ready to launch a loyalty campaign that not only collects data but also drives your customer retention and increases the CLV of your customers?