As business owners, CEOs, and marketers, the Marketing Folk are always looking for new ways to help increase profits and grow your businesses. One of the most important things to focus on is customer lifetime value (CLV). CLV is the total amount of money that a customer will spend on your product or service over the course of their life. In other words, it’s how much someone is worth to your business.
It’s important to focus on CLV because it allows you to see the big picture. It’s easy to get wrapped up in acquiring new customers, but if those customers only make a one-time purchase and then never come back, they’re not really worth that much to your business. On the other hand, a customer who makes frequent purchases and refers their friends and family to your business is much more valuable.
CLV should be a key metric that you track in your business. There are a number of different ways to calculate it, but the general formula is pretty simple:
CLV = ((Average Order Value x Purchase Frequency) + Retention rate) – Churn Rate.
Why Should You Care About Customer Lifetime Value?
CLV is the total amount of money that a customer will spend on your product or service over the course of their life. In other words, it’s how much someone is worth to your business.
It’s important to focus on CLV because it allows you to see the big picture. It’s easy to get wrapped up in acquiring new customers, but if those customers only make a one-time purchase and then never come back, they’re not really worth that much to your business. On the other hand, a customer who makes frequent purchases and refers their friends and family to your business is much more valuable.
What is Customer Lifetime Value?
There are a number of things you can do to increase your customer lifetime value:
1. Increase brand loyalty among existing customers by delivering exceptional customer service
2. Use targeted marketing campaigns to attract new customers who are likely to be high value
3. Encourage repeat purchases by offering discounts or loyalty rewards programs
4. Increase order values by upselling or cross-selling complementary products