Certainly, your customers are invaluable to your business or brand, but have you ever actually calculated the customer lifetime value (CLV) in terms of marketing and revenues? Industry experts concur that it is far cheaper to make the added efforts to retain an existing customer than it is to garner a new one. In fact, it is estimated that it costs around five-to-25 times more which makes customer satisfaction a key to retention.
Consider this when approaching your marketing strategies and plans for the coming year.
Customer Lifetime Value
To calculate customer lifetime value, you need some other figures and numbers. Typically, the formula entails calculating the average consumer purchase amount, multiplied by the average number of visits to establish the customer value. Next, you multiply this value by the average customer lifespan to find the lifetime value of your customer. Do the math:
- Average purchase value is the total amount of revenues earned by your company in a specific time frame, divided by the number of purchases made during that same time frame.
- Average purchase frequency rate is found by dividing the number of purchases by the number of distinct customers making purchases during that time frame.
- Customer value is the average amount of a purchase multiplied by their average purchase frequency.
- Average customer lifespan relates to the average number of years you can expect a customer to purchase from your brand.
Calculate the CLV by multiplying the average customer lifespan by the customer value to find the CLV, or customer lifetime value. This is a general, non-specific figure that you can use in marketing plans to establish what an average customer generates your company in revenues over time.
When customers are happy, everybody wins. Subsequently, many of your patrons will buy again and experts have found that companies who focus on customer success and satisfaction thrive, grow, and prosper.
What are your customers worth? Retaining your loyal clientele may be key in growing and maintaining your business or brand. You have the formula; do the math. A loyal consumer base is integral to grow and thrive in today’s competitive market; keep this in mind when formulating your marketing strategies and campaigns.