How Businesses Use Customer Lifetime Value?

   By: Marketer Rakib
Customer Lifetime Value

Despite being an integral part of the business, customer lifetime value has always been understated. In the early days, the eCommerce industry only had a few competitors; hence, they never spared a thought of retaining their current customers.

However, the time has changed, and today the eCommerce market is filled with competitors. One mistake and you will lose your customer to your competitors. The worst part is that retaining a customer has become easier than finding a new one. Hence, losing a customer is a great deal.

This is where understanding the value of customer lifetime value is of epitome. For many years, marketers have talked about how customer lifetime value is, but they themselves have overlooked the most important aspects of business management.

Why Is Customer Lifetime Value Important?

If we go by the definition - A customer lifetime value is the amount a customer brings into the business in their entire lifetime. It represents the single customers who have been loyal to the brand and have been part of your business for a long time.

The importance of the customer lifetime value can be evaluated because there is no upper limit to what a customer can bring into your business. Hence, if you can leverage that fact, you can significantly boost your annual revenue.

How Businesses Use Customer Lifetime Value To Their Advantage?

There are many ways a customer lifetime value can be used to expand the business’s potential. Out of all the methods, we believe that the following are the best actionable ways.

1. Benchmark Your Efforts

The most basic way to use customer lifetime value is to benchmark your business and know where your business stands in the market in terms of net capital. Today, the successful businesses you see in the market use the CLV to determine their position and foresee their business sustainability.

For better results, we would like you to advise us to find the CLV every month and record it somewhere for future references.

2. Decide The Area Of Investment For CLV Growth

When you know your customer lifetime value, you know the area that brings the major part of the business revenue. You can use this opportunity to highlight the weak links in your business model and deal with them accordingly.

Essentially your customer lifetime value is supported by the following pillars.

  • Average Order Value.
  • Purchase Frequency.
  • Customer Lifespan.

These three pillars help you determine the areas that need most of your business investment to revamp the business infrastructure.

3. Discover Most Profitable Acquisition Channel

Customer lifetime value is not only calculated based on your business average revenue, but it can also be used to find the determinantal factor.

When you segment your customer in this it gives you two actionable pieces of information:

  • It shows which channel is bringing in more profit.
  • It shows the worth of customers from each channel.

4. Discover Your Most Profitable Customer

Perhaps this might be the most practical way to use the customer lifetime value metric. By calculating the CLV, you can find who your customers are, their online behavior, their interests, and other major areas that can be used for further classifications.

Once you know what your audiences look like, you customize your services and offer tailor-made services.

Final Thoughts

Effective use of customer lifetime value can give you an insight into your current business standing and foresee where your business might stand in the future.

In addition to that, knowing your business’ CLV puts you and your business in the top 5% of the companies that are actually taking advantage of the customer lifetime value.

Using the customer lifetime value to make your business decision ensures that you make the right decision every time.

Marketer Rakib is a full-time Blogger and Affiliate Marketer. Follow Rakib to learn how to scale up your online business for more Make Money. Before starting this blog, Rakib managed world's top digital marketing agencies. Now, He has been helping people to make money online through affiliate marketing.

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