Maximizing Customer Lifetime Value
Maximizing customer lifetime value can have a huge impact on your bottom line, because LTV/CLV measures the total profits from average customers, until they stop being your customers. If you want to maximize your clv, pay attention to the revenue and cost associated to repeat and referral sales.
We will explain all these concepts and how they affect LTV in future episodes of Haggle This so subscribe today.
Understanding Customer Lifetime Value
LTV measures the expected profit from a cohort of your customers or from your customers at large. Customer Lifetime Value will lead you to identify your most valuable customers, and what drives them.
In other words, understanding LTV makes your business more profitable, because you can follow the money.
Re-marketing to current customers costs less than convincing someone new. Unfortunately, your industry may change over time, which could affect your LTV.
CLV = average value of sale × number of transactions × retention time × profit margin
- The Cookie Company’s average order is $100
- The average customer buys three times per year
- The average customer remains loyal for two years
- The average margin is 10%
100 X 3 X 2 X 0.1 = 60 LTV
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Summary: Maximizing Customer Lifetime Value
Your business can be more profitable by leveraging LTV due to increased sales, improved customer retention, and efficient operations.
LTV is created or dilapidated by your entire company, not just sales and marketing.
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