As we talked about in the newsletter, knowing your Customer Lifetime Value (CLTV) gives you incredible freedom to generate as many new customers as you want, literally at will.
Just to recap what we covered in the newsletter, your Customer Lifetime Value is the estimated revenue a customer will generate during the entire span of their relationship with your business.
The CLTV includes not just the first purchase your customers make (because there may not be any profit in that purchase if you use the strategy we discussed in the newsletter), but also how much a customer is likely to spend (on average) in the future as they buy more products and services from you.
When you understand how much revenue each new customer will bring you, you know how much you can spend on attracting a new customer into your business. Oh, and if you haven’t calculated your Customer Lifetime Value yet, you can use this free CLTV Calculator to do it now (it opens in a new window so you won’t lose your place).
The awesome infographic below was created by KISSmetrics, and it shows you in even more detail how to calculate the lifetime value of your customers using Starbucks as an example, and how you can use that information to optimize your marketing and advertising budget.
So How Can You Boost Your Customer Lifetime Value
The fastest way to increase your CLTV is to segment your customers based on what they are interested in (what they have purchased, or what they have asked for more information on), and how much they have spent with you. And once you have them segmented like this, send them offers for products and services they are very likely to want to buy.
You can easily double or triple your conversion rates when you offer people the exact thing they want to buy, and your customers will be delighted that you did. In marketing terms, it’s kinda like shooting fish in a barrel, but without all the death, blood and mess of course…
There’s something else very important you can see on the infographic above – research shows if you can get just a 5% increase in your customer retention, you can increase your profits by anything from 25% to 95%. The same study found it costs six to seven times more to attract a new customer than to keep an existing one.
So what does this mean? When you do everything you can to delight your existing customers, cater to their needs, and make them feel special, not only will it boost your retention rate, but your customers’ Long Term Value will get a huge boost as well.
Here’s what to do next
If you’d like to start immediately increasing your Lifetime Customer Value, register for a free Strategy Session by visiting this page and together we can lay out a plan for you to get started right away.