The Power of Customer Lifetime Value
Customer lifetime value (CLV or CLTV) is a way to measure the total profit a company can earn from a customer throughout their entire business relationship. This includes their first purchase, future purchases, and how long they shop with the company.
For example, think about someone who loves Apple products. They regularly upgrade their iPhone, air pods, smartwatches. If they were to continue, their CLV could go up to $10,000, if not more. This means they’ll keep buying from Apple.
Now imagine a person who’s really into fitness. They frequent a local health store for protein supplements, energy bars and more. Depending on how much they buy and their loyalty, their CLV could surpass the Apple user, to the $15,000 mark.
Understanding customer lifetime value helps you gauge the loyalty of current customers. When customers keep buying from you repeatedly, it usually means you’re doing well and a high CLV means less spending on new customer acquisition.
Why is CLV important?
It helps you understand how much you should invest to maintain a good customer relationship. Imagine if a customer’s CLV is $200. You wouldn’t want to spend more than that to keep the relationship because it wouldn’t be profitable.
It can help your strategy on acquisition, customer retention, customer support, and even the quality of your products and services. CLV emphasizes nurturing existing customers alongside attracting new ones, helping businesses make smarter decisions for the future.
Techniques to Improve Customer Lifetime Value
- Keep in touch with long-time customers to show you value them. Make communication easy both ways.
- Simplify the return process so customers can easily bring back their purchases. Complicated or costly returns lead to unhappy customers and fewer future purchases.
- Encourage repeat buying with a loyalty program that offers achievable and desirable rewards.
- Treat your most loyal customers by offering unique options. For instance, if someone plans to cancel a subscription, provide a discounted alternative to keep them engaged.
- Offer special discounts or promotions exclusively to your existing customers.
- Suggest additional products or services to increase the value of each customer’s purchase.
Understanding CLV and its significance can be a game-changer for any business. By maximizing CLV, you can create a solid foundation for sustainable growth and enhanced customer loyalty in the marketplace. It’s not just about making a sale today; it’s about securing a customer for a lifetime.
SalesWarp’s customer management tools allow you to provide exceptional customer service while helping you better track and analyze customer data. By utilizing SalesWarp’s features, you can gain deeper insights into your customers’ behavior and preferences, allowing you to tailor your strategies to maximize CLV. Want to learn more? Schedule a free demo with a specialist here!