Business Recovery Strategies You'll Love
Reignition Loyalty
Your Fast Track Guide to Understanding, Calculating and Improving 5 Minute Read
Pillar # 2 -Your Customer Lifetime Value [CLV] in 2023
What is the Customer Lifetime Value ?
Customer Lifetime Value [CLV], is a performance indicator that tells you the total revenue your business can reasonably expect from a single
customer throughout your business relationship. It considers a customer's revenue value and compares that number to your predicted customer lifespan. The longer a customer continues to purchase from your business the greater their lifetime value becomes. It tells you which customers spend the most with you and which ones will remain loyal to you for the longest amount of time. Once you know your CLV you can work out the most efficient ways to acquire new customers and retain existing ones while optimising and maintaining your profit margins.
If the CLV metric is a calculation you’re unfamiliar with you’ll never really know how well or otherwise your business is performing and importantly whether you’re leaving money on the table. Your CLV can also be used to help you make important business decisions. For example, you can use your CVL to identify customer segments that are most profitable for your business so you can target accordingly.
Use the formulas and model provided below and start calculating the LTV for your business today.
How to Calculate Your Customer Lifetime Value.
If you review CLV as a priority in your business, you can identify any worrying trends and come up with action items to address them. For example, if you find the CLV to be consistently low, you can work to optimise your customer support strategy or loyalty program to better meet the needs of your customers.
Customer Lifetime Value = (Customer Value * Average Customer Lifespan)
To find your CLV, you need to calculate the average purchase value and then multiply that number by the average number of purchases to determine customer value. Then, once you calculate the average customer lifespan, you can multiply that by customer value to determine customer lifetime value.
Take the average order value, multiply it by the number of sales they’ll make in a given period, then lastly multiply it by overall retention time.
For example, our online food shop has an average order value of € 75 which is made four times every month. The customer stays for a total of 6 months, until leaving. Therefore, we take €75, multiply it by four which gives us € 300, lastly, we multiply this by the retention time of 6 months – €1,80
Simple right? Apply it to your own business and gain a powerful insight into where your business is heading.
3 Practical Ways to Improve Your Customer Lifetime Value
Now that you know your customer lifetime value, how do you increase it? Here are some strategies that can help.
1. Improve Your Customer Service.
90% of UK buyers say that customer service is one factor they consider when choosing companies to do business with. So if you want to improve your CLV you should pay attention to your customer service and look for ways to make it outstanding. You can enhance customer service by making small and inexpensive changes to the way you do business e.g. by offering existing customers a more personalised service, exclusive loyalty membership , or an easier returns or refund policy.
Why This Works It’s simple: The better your customer experience the more customers feel valued by your business for more than just their purchases. If you stand behind your products with substantive return and refund policies, it communicates to customers that your priority is quality and satisfaction, not overall sales volume. The result? Increased CLV.
2. Build Long-Lasting Relationships.
Long-term customer relationships are based on trust. If buyers believe that your business offers them the best prices on the products and services they want, they’ll come back. But this is just the beginning. With social media now an important part of any branding and marketing efforts, customers want more than just a business-based relationship — they want to cultivate a personal connection that makes them feel like more than simply a road to better business ROI.
As a result, it’s critical to engage with customers on your social media accounts with more than just canned advertising posts. For example, your teams could start a back-and-forth conversation about something that interests your target customer base, or you could do some social sleuthing to discover more about your customers and then send them a (small) free gift that aligns with their interests.
Why This Works
This works because you need to stand out from the crowd. Quick and easy eCommerce and slick offline sales are now par for the course — if you can forge an actual connection with customers you’ll keep them coming back and increase your total CLV almost immediately
3. Embrace Good Advice.
Sometimes in business it’s better to listen than talk. Customers often have good advice on how you could improve business practices to better serve their needs — and you can increase CLV by taking it.
For example, you could create a poll on new product or service ideas and see what your customer base thinks. Make sure you don’t lock them into a specific set of choices; give them room to add their own ideas that could help make things better. While not every customer will participate, those that do will often have good advice and can end up being some of your most loyal customers.
Quick tip: Give credit where credit is due. If a customer comes up with a good idea, credit them for the help and consider sending them something as a token of appreciation.
Why This Works
This works because it shows you’re willing to listen. Too many businesses take the stance that they always know what their customers want better than customers themselves, which in turn can lower total CLV. By taking the time to listen and respond — even if customer advice isn’t exactly what you want to hear — you can facilitate long-term loyalty and boost CLV.
Need Help or Have Questions ??
If you have any questions or require assistance, Contact Us
In a HURRY ? Click Here to master Pillar # 3 - Y our Customer Conversion Rate {CCR]
Privacy Policy I Cookie Policy I Terms and Conditions I GDPR Compliance I
Built With Love in London UK and Marbella Spain - Now Available Worldwide
© Reignition Loyalty 2024 . Thank You For Visiting Us Today - We Deliver Small Business Growth Effectively and Responsibly