How to Achieve Accuracy With Your Customer Lifetime Value
While some companies aim to grow their customer base, the successful ones recognize the importance of increasing customer lifetime value. Repeat loyal customers offer more value to your business--generating over 10x more revenue.
Customer lifetime value (CLV) is a critical metric used to estimate how much each customer you acquire will be worth to your company. It validates whether you’re actually producing a profit.
The calculation of the CLV is dependent on the margins you earn per unit of your product, the retention rate, and a set discount rate. Therefore, you are really calculating the net present value of one customer. Several companies strive to increase customer lifetime
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The true value of a lifetime customer happens as each new client relationship develops.
Start by delivering value over multiple channels. Seek out ways to bring relevant content to your customers’ purchasing decisions. Adjust your value to fit the needs of your customer. Try new ways to connect—long-form blog posts or 15-minute podcasts—then implement the strategy over a scheduled time period.
For example, if a client subscribes to your task management SaaS platform, it would be helpful to send a welcome email that includes useful articles and case studies on how to communicate effectively with a remote team.
Email marketing is another powerful method of improving your CLV. In a study by the Database Marketing Institute, Arthur Hughes examined “average predictions of customer LTV based on an email strategy.”
By complementing email strategy with personalization techniques, these numbers grow dramatically. See below.
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Reactivate dormant consumers by creating a sense of urgency and scarcity. Issue a coupon code to these customers that’s valid for only 48 hours. A remarketing campaign also can bring interested visitors back to your website with one-time deals. Achieve more repeat sales by offering customers a deadline and
High levels of customer satisfaction will not guarantee future sales, but are more likely to result in repeat future sales than indifferent or poor customer service. Moreover, satisfied customers are more likely to try out other products/services in the firm’s range, or recommend it to friends and family. Build on customer loyalty Customer loyalty is valued highly by most businesses and can be
Customer loyalty comes from the personal relationship that is developed between the customer and the business. One method used to understand the customer relationship is called customer relationship intensity and Life-cycle segmentation (UOP, 2007). This process includes classifying all the customer relationships into one of five groups.
Soman,D & Marand, S (2009). Managing Customer Value: One Stage at a Time.: World Scientific Publishing. p9-14.
...rs since the reward is tangible. Since 80 percent of profit comes from a small percentage of customers, programs should be developed to retain them. Companies will use resources that aren’t available to the entire customer base to ensure they are retaining their most valuable customers and offering incentives to encourage others to move up.
d) Enlarging new customers. Research on the consumer purchase behavior is an essential need. The analysis data will provide more information on who, how, and why to buy, and also understanding the competitors marketing strategic plan. Secondly, by analyzing the majority of subscribers age group, gender, preference items. Sending regular email on current promotion items and offer them with the 1st trial discount voucher to convert the subscribers into customers.
Being able to provide exactly what your customers are looking for is one of the best ways to gain and retain customers. You will also begin to see that customer satisfaction is climbing, which makes it much easier to cross-sell and up-sell and thus increase your profitability.
Weinstein, A. (2012). Superior customer value: strategies for winning and retaining customers (3rd ed.). Boca Raton, FL: CRC Press.
The Net Present Value (NPV) is a Discounted Cash Flow (DCF) technique that relies on the concept of opportunity cost to place a value on cash inflows arising from capital investment, where opportunity cost is the "calculation of what is sacrificed or foregone as a result of a particular decision".
Apex offers many trips and classes that range from 4 hour periods, to multi day expeditions. One major challenge is how to attract both new, and existing clientele that mostly participate in day trips, to more intensive multi day excursions. Fortunately, there are several marketing strategies that can be utilized to aid in this process. These include, guerrilla marketing, the use of social media, determining target areas and demographics, offering incentives to clientele, as well as active community involvement from the Apex team.
The more profitable firms are those that are able to maintain their most valued customers throughout time. To satisfy a customer means to make him faithful and customer satisfaction becomes the index that measures the ability of the firm to produce income for the future.
Naumann, E. (1995). Creating Customer value: The Path to Sustainable Competitive Advantage. Cincinatti: Thomson Executive Press.
Strive to earn customers’ long-term loyalty by working to deliver more than promised, being honest and fair to provide exceptional personalized service that creates a pleasing business experience.
According to David Jobber (1995), marketing- oriented organization endeavor to create customer value with a specific end goal of attracting and retaining customers. Their main aim is to deliver better esteem to their targeted customers. In doing as such, they actualize the advertising idea by meeting and exceeding customer’s needs better than the competitions.
Customer Relationships is about building a relationship of trust and convenience. A customer wants the company they are working with to be intuitive. To know their needs before they do. They want to feel respected, they need to believe you are honest and have integrity. This relationship breeds comfort and familiarity and causes the consumer to continue to do business with your company. This relationship that is built develops a personal relationship, like a friendship and it is one that the consumer cannot get from the store down the road and it is that personal touch of sincerity, of knowing their needs, of servitude that will turn them into lifelong branded customers.
There are many description and theory of customer loyalty. We should research and compare which theory is suitable for our business.