My Little Secret Every Marketer Needs To Get New Customers

Increasing the lifetime value of existing customers is where the real money is made.

This is done through Customer Lifetime Value (CLTV).  CTLV is the dollar value of a customer relationship in relation to the present value of projected future cash flows gained from those relationships.  CLTV is an important concept that places the focus on the long-term health of maintaining customer relationships. 

Predicting CLV is important to determine how much ad spend you can afford to get new customers at breakeven or better through your marketing efforts.  For example, if a new customer costs $30 to acquire, and their lifetime value is $40, then that customer is said to be profitable, and as a result you can continue to market to get similar customers.

Every business should look to improve its CLTV by marketing to both new and existing customers while building profitable relationships with such customers.  Use it to assess the financial value of each of your customers.  It can benefit your business when used to segment your customers to a point where you understand that not all customers are equally important.

CLTV is a way of segmenting your list of buyers in order to understand the value of that list and market to that list more effectively.  Using the CLTV based segmentation model will allow your business to predict your most profitable group of customers to gain understanding of their most common characteristics so you can focus more on that group rather than on your less profitable customers.

Value and Strength of Customer Relationship

Advantages of using CLTV:

• Your relationship with your list becomes an asset.

• You become encouraged to focus on the long-term value of customers instead of investing resources attracting “cheap” prospects with low total revenue value.

• It measures the impact of your marketing investments on the value of customers.

• It determines the optimal level of investments in marketing and sales activities.

• Optimizes allocation of limited resources for ongoing marketing activities in order to achieve maximum Return on Investment (ROI).

• It’s a good basis for selecting customers and for making decisions regarding strategies to effectively communicate.

• It’s a natural decision criterion to use in the automation of customer relationship management systems to measure customer loyalty (proportion of purchase, probability of purchase and repurchase, and purchase frequency and sequence, etc.).