Customer Lifetime Value

Customer Lifetime Value

Customer lifetime value is a simple calculation of how much money your customer spent with you.

Many businesses suffer from a single transaction with their customers. This is a challenging business model because you need a steady stream of new customers.

Other businesses that sell consumables will see the customer more than once. Something like pool chemicals or groceries that once they are used up the customer has to buy more either from you or someone else.

How many businesses do you buy from that don’t know you?

They don’t have you in a CRM (customer relationship management) tool?

A lot right!

It blows our minds that most businesses have no idea who came in, bought and left. How can you increase your share of voice with your past customers if you have no idea who they are?

I hope your business has a CRM, and that it is tied into your sales tracking so you can tell how much someone spent with you and so you can market to those that have purchased from you before. If not we recommend Infusionsoft as the best CRM for marketing to our customers.

Really good companies are able to sell over and over again to the same customers, increasing their lifetime value of their customers.

customer lifetime value graph

Why is customer lifetime value important to marketing?

You need to know what a customer is worth to you on so you can figure out if you can spend more in marketing to acquire more ideal customers.

In another article we discussed Cost of Acquisition for a customer, and if your cost of acquisition fits well inside your overall customer profit then you can continue to spend on that acquisition strategy.

If your cost to acquire is too high based upon your customer lifetime value then you are spending too much in acquisition.

The best marketing campaigns acquire your ideal customers, and they are the ones with a high lifetime value to you that you actually like working with.

Bad marketing campaigns bring you customers shopping on price only that come once because you advertised a great sale price, and they are loyal only to lowest price available. They have no loyalty to your business and will not come back and buy at the regular price, unless there is another factor a play like convenience. But, don’t delude yourself into thinking they are loyal to you.