The customer lifetime value is how long customers buy products. It’s calculated by adding up the net profit from all purchases made by a customer.
The customer lifetime value can be calculated in one of two ways:
– The first way is to calculate the total revenue generated by an individual customer over their lifetime.
– The second way is to calculate the average revenue generated by all customers in a given period.
The most critical factors contributing to a customer’s lifetime value are an individual’s propensity to purchase products and the frequency of these purchases. The importance is we gain good customers; we need to nurture them by providing products like a customer usually enjoys or would purchase when they buy it.
One example is airline service; buying cheap flight tickets may increase the number of customers who don’t need food onboard and don’t want to splurge on pricey luggage. Those customers might not be as valuable as other, more profitable customers that usually fly coach and carry on with their box of snacks.
After analyzing some data, you should do a forecast checklist for better ROI (return on investment) for your marketing campaigns. Knowing your ideal type of client will help you budget better, optimize ROI more efficiently, and use less resources in allocating resources (e.g., ads) to prospective clients between set retention cost-verses potential payout figure and overall potential payout figure.
You cannot grow your business with new customers if you’re not good at retaining them. This section introduces you to Customer Lifetime Value, which gives you three ways to bargain with your customers.
Customers who stay loyal and updated on your brand identity are happier, more loyal, and provide a better ROI. Start to make it a habit of asking these five questions:
Is there anything we could do differently to make you understand our brand better?
Did you find out something we could’ve asked that you need?
Can we help in any way to have your identified needs met faster?
What can we do so you don’t have to worry when it comes time for an upgrade or an emergency?
Is there anything I (a customer) need or should know that you didn’t tell me yet?
Daniel McCarthy teaches us more about retaining customers.
Watch or listen to the entire episode to know a lot more.
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