Calculating Customer Lifetime Value
One of the keys to regulating cash flow and deciding what marketing channels will be most effective is to determine the lifetime value of a customer. Once you know this metric you can effectively decide what effort or dollar amount of output is reasonable for acquiring or retaining a customer.
Determining your customer lifetime value evaluates several factors:
- The average price of the service(s) you provide
- The average time period between purchases
- The average number of years you retain a customer
You could certainly take the calculations deeper with other factors, but these basic ones will be the start to understanding what adjustments can be made in your marketing efforts. As you develop additional ways to provide value to your customers, your Customer Lifetime Value (CLV) will increase proportionally and sometimes it can have an exponential effect on your CLV.
CLV also should be evaluated to find out if you have untapped opportunities with your current clients.
- Are there any related services that you could offer your current clients to provide them more value and cause them to see you as a trusted guide in their business?
- What is the best way to communicate with clients when you offer services that may only be performed once per year or even longer recurrence?
- What channel partners can you team up with to help provide additional value to your clients? For example, if you offer parking lot striping, are there any seal coating or asphalt maintenance companies with which you could partner to develop a stronger customer relationship?
- What valuable information or training can you provide your clients and prospects to help them recognize that you are the guide that they need to accomplish their company goals?
Use our CLV calculator below to help you with this determination and feel free to drop us a line to let us know how it helps you with your marketing strategy.
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