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Calculate Customer Lifetime value

Starting with the moment a new customer begins purchasing your product or service through the final termination—the value that a customer contributes to your business over the entire period of their business relationship with you—the customer lifetime value is one crucial metrics for retail businesses.

This needs to be measured at regular intervals, as this is helpful in defining your sales and marketing goals clearly, in addition to encouraging customers to linger on with your business for a longer period of time.

The Significance of Customer Lifetime Value in Modern Business

In E-Commerce setting, by properly gauging customer lifetime value, startups get to determine what their acquired customers are individually worth to their business in the long run. It helps entrepreneurs to understand and reduce customer acquisition costs, measure how long recouping the investment will take, how retention can be improved, and how much to spend on retention.

The Crucial Role of Customer Lifetime Value in the Growth of Startups

The ratio of Customer Lifetime Value to Customer Acquisition Cost is one key indicator of the financial health of your business model. Startups, with their financial constraints and need for sparing use of resources, need to use Customer Lifetime Value for understanding customer acquisition cost while being able to keep their business growing in a healthy manner.

By proper measurement of Customer Lifetime Value, businesses can avoid ending up spending too much on customer acquisition. Having identified the most valuable group of your customers, your focus may be directed toward providing tailored customer service and this will lead to your customers sticking with you for long and become long-term clients.

Methods of Calculating Customer Lifetime Value

  • Historic Customer Lifetime Value: It is the sum of gross profit obtained by totaling all the historic purchases that an individual buyer has made
  • Predictive Customer Lifetime Value: This predictive analysis related to previous history as well as behavior patterns helps forecast the lifetime value of your customer.

Factors that Necessitate Calculation of Customer Lifetime Value

  • Enhanced Customer Retention: The value of your marketing campaign must be in terms of its impact on Customer Lifetime Value of your targeted customer segment.
  • Achieving ROI Generation on Customer Acquisition: By calculating the Customer Lifetime Value, you will be able to focus better on the most profitable customers and those who are the best for your business.
  • Behavioral Triggers can be Improved: Organizing data into clusters enables you to discover the specific behavioral triggers that led your customers to make their first purchase with you.
  • Output can be Improved with Customer Support: It is well known that a handful of your customers contribute to the major portion of your revenue generation. By using Customer Lifetime Value, you will be able to direct your precious customer service resources.
Statistics show that even a small increase in retention greatly increases profits while cost of acquiring new customer is several times expensive than retaining existing ones. This is clear indication of the need for you as business owner to use Customer Lifetime Value and achieve maximum possible retention!

03 Comments

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    12 Sep,18

    Steve Smith

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      12 Sep,18

      Jhon Martin

      Lorem ipsum dolor sit amet, consectetur adipiscing elit sed do eiusmod tempor labore dolore that magna aliqua. Ut enim ad minim veniam, exercitation.

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    12 Sep,18

    Warner Martin

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