Maximising Customer Lifetime Value
Welcome to the latest edition of Strategic Marketing Insights!
In a customer-centric world, understanding and developing Customer Lifetime Value (LTV) can provide invaluable insights for businesses aiming to drive growth.
This week, we look at the importance of LTV and provide a comprehensive guide on calculating and optimising it to align your marketing strategies with customer value. From identifying your most valuable customers to developing personalised communications and creating an Omnichannel experience.
Read on to learn how to maximise both retention and revenue.
Understanding and Developing Customer Lifetime Value (LTV)
Understanding customers, what they value and how much they are worth is essential for any organisation hoping to drive growth. Knowing where customers come from, what they care about and how much they spend with a brand at different touchpoints will help develop marketing strategies to drive future expansion.?
This article will explore the concept of Customer Lifetime Value (Sometimes called CLV, CLTV or LTV) and some of the key metrics that will give businesses visibility into how much each customer is worth, in order to build tailored strategies moving forward.?
Why is Understanding LTV Important???
In today’s highly competitive marketplace, success is less about gaining new customers and more about retaining existing ones and maximising the amount of revenue they bring. (Due to the current economic situation, focusing on customer retention is more important than ever.)??
Measuring customer loyalty and retention brings insights into which customers are likely to respond positively to certain incentives or marketing campaigns. For example, observing a difference in the average LTV between younger and older age segments, an organisation may decide to employ a new strategy focused solely on the younger age group, building relevant branding towards this demographic.?
LTV is often used as a measurement of customer loyalty as it provides insight into how likely a customer is going to remain with a business over time. It also helps in understanding the value of a customer base as a whole, providing insights into how much a business is worth. This data is essential when it comes to making decisions around whether to adjust a business model or make changes to marketing strategies.
How to Calculate Customer Lifetime Value?
The customer lifetime value formula is as follows:?
Annual profit contribution of a customer x the number of years they remain a customer – customer acquisition cost (CAC) – any costs associated with providing the product and servicing the customer and any retention costs.??
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