Customer retention is as important as customer acquisition because when you retain your old customers, you will be able to save a considerable amount of money. Moreover it will also help you save money on your marketing budget but for this you will need to understand what is customer lifetime value and how to increase it? It is especially very important as it will help you make strategies that will help your business to get positive results and earn higher profits from your business endeavors.
Customer lifetime value is the sum of total value generated
by your customers for your business during their entire relationship with you. This total is either derived by fixing a time period or on an average basis so that you can understand the customer loyalty or customer retention towards your business or brand during a specific period of time. There are different ways of increasing customer lifetime value but the most popular and effective ways including increasing sales over time, reducing costs to serve customers retaining customers longer and motivating your customers to make higher value purchases on every transaction. For increasing per customer sales, you will need to follow tactics like up-sell and cross sell but you should always pay attention to not overusing these tactics as it will have a negative impact on customer relationships. You will also need to put in efforts for wining your customers back because customer retention can have a positive impact on the profitability of your business. Moreover you should also look for ways improve customer satisfaction and gather information that will help you retain your customers for a longer period of time and win other customers. It is a also important that you educate your customers in the right manner so that they will know everything about your products and services. This involves educating them about the features of your product and services so that they will believe that you are offering superior quality products and services as compared to your competitors.
Customer lifetime value calculation is very important for your business as it helps you determine the time period for which a particular customer is associated with your business. There is a formula for calculating the customer lifetime value which includes
Average value of sales X number of repeat transaction X average retention time period for a customer.
It is very important for your business to know about customer lifetime value as it helps you to know the popularity, profitability and customer retention for your business. Moreover if you don’t find profitable results for your business, you will need to put in efforts so that you can bring back your past customers. You will also need to increase marketing allowance which will help in increasing customer loyalty so that you can boost your customer lifetime value. It will make you enjoy positive results for your business so that you can focus on retaining your past customers and acquiring new customers which is very important for earning more revenue and profits from the sale of your products and services.