Post by account_disabled on Nov 29, 2023 8:47:48 GMT
Selling a product to an existing customer is cheaper and easier than acquiring a new one. For this reason, companies focus on building trust and loyalty. However, an even more profitable practice is to calculate your CLTV and then focus on your most valuable customers. How to do it? We explain! CONTENTS: What is customer lifetime value and why is it important? How to calculate the CLTV value? How to improve CLTV? Summary What is customer lifetime value and why is it important? CLTV (Customer Lifetime Value) determines the revenue (or income) that a company can realistically expect from a customer over the entire duration of the business relationship. If he makes purchases in your store 5 times a year for PLN 100, his CLTV over a 10-year period is PLN 5,000. Of course, this is a very simplified diagram. To accurately calculate the profit that one customer will generate, you need to take into account the costs of acquiring him (e.g. advertising budget.
Why calculate and analyze customer lifetime value? The CLTV indicator Special Database helps, above all, manage marketing strategies more effectively and - like almost every activity in business - improve results. Customer segmentation Not all consumers have the same value to a company. Thanks to CLTV analysis, you will be able to group your clients according to how much profit they generate. This, in turn, will allow you to direct your time and financial resources in the right direction. It is worth mentioning that focusing solely on customer acquisition costs is not always a good solution. Imagine that you acquired 100 customers in channel A and spent PLN 1,000 on it. Using channel B, you managed to get 50, but the total cost was PLN 1,500. table regarding cltv At first glance, you can see that channel A is more profitable because you gain more customers and spend less. However, if you also focus on value, i.e. CLTV, the conclusions may be completely different.
table regarding cltv Due to the fact that customers acquired through channel B have a higher value, activities in this channel ultimately turn out to be more profitable. Thanks to this analysis, you already know that it is worth directing your resources primarily to channel B and focusing on these consumers the most. This way you are able to reduce your sales costs! Forecasting sales results CLTV allows you to calculate how much revenue a customer is likely to generate in the next two, five or ten years. Based on such a forecast, the company is able to make rational decisions in various areas (e.g. marketing budget, investment in goods) and thus improve the effectiveness of its activities. Example: by calculating the average value of customers, you can plan your marketing activities so that you definitely gain and not lose. Maintaining customer loyalty To put it very simply, we can say that CLTV determines customer satisfaction and loyalty. If someone often buys from one company and spends large amounts of money, they are most likely satisfied with the "cooperation". Similarly, when CLTV is low. If you can verify the problem and then solve it, you can significantly increase the loyalty of your customers. How to calculate the CLTV value? There is no single formula to calculate customer long-term value. It depends, among other things, on the company's approach, business goals and strategy. Some people use the indicator to estimate revenue, i.e. they do not take into account marketing and production costs. Others, however, take into account a multitude of factors to determine the real profit. It's up to you which solution you choose. CLTV calculation models can also be divided into historical and predictive models.
Why calculate and analyze customer lifetime value? The CLTV indicator Special Database helps, above all, manage marketing strategies more effectively and - like almost every activity in business - improve results. Customer segmentation Not all consumers have the same value to a company. Thanks to CLTV analysis, you will be able to group your clients according to how much profit they generate. This, in turn, will allow you to direct your time and financial resources in the right direction. It is worth mentioning that focusing solely on customer acquisition costs is not always a good solution. Imagine that you acquired 100 customers in channel A and spent PLN 1,000 on it. Using channel B, you managed to get 50, but the total cost was PLN 1,500. table regarding cltv At first glance, you can see that channel A is more profitable because you gain more customers and spend less. However, if you also focus on value, i.e. CLTV, the conclusions may be completely different.
table regarding cltv Due to the fact that customers acquired through channel B have a higher value, activities in this channel ultimately turn out to be more profitable. Thanks to this analysis, you already know that it is worth directing your resources primarily to channel B and focusing on these consumers the most. This way you are able to reduce your sales costs! Forecasting sales results CLTV allows you to calculate how much revenue a customer is likely to generate in the next two, five or ten years. Based on such a forecast, the company is able to make rational decisions in various areas (e.g. marketing budget, investment in goods) and thus improve the effectiveness of its activities. Example: by calculating the average value of customers, you can plan your marketing activities so that you definitely gain and not lose. Maintaining customer loyalty To put it very simply, we can say that CLTV determines customer satisfaction and loyalty. If someone often buys from one company and spends large amounts of money, they are most likely satisfied with the "cooperation". Similarly, when CLTV is low. If you can verify the problem and then solve it, you can significantly increase the loyalty of your customers. How to calculate the CLTV value? There is no single formula to calculate customer long-term value. It depends, among other things, on the company's approach, business goals and strategy. Some people use the indicator to estimate revenue, i.e. they do not take into account marketing and production costs. Others, however, take into account a multitude of factors to determine the real profit. It's up to you which solution you choose. CLTV calculation models can also be divided into historical and predictive models.