What is customer lifetime value and how to increase it?

What is customer lifetime value and how to increase it?

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.

Essentials in Starting a Business

business-sunstarLet’s have a throwback, as far back as the cavemen maybe, talking about where the best place for hunting, chances are they got into talking amongst themselves. Then the best hunting area becomes the most popular spot for everyone. The Power of Word of Mouth.

When you really come to think about it too, word of mouth may be the first social medium used too.

Investopedia defines word of mouth as “when a consumer’s interest for a company’s product or service is reflected in their daily dialogs.” And isn’t this the essence of digital marketing too? Choose any platforms, even the word viral is defined as being passed on from to another [read: telling 2 friends who told another 2 friends ad infinitum]. There may be no physical talking involved at times but distilled to its essence it is still word of mouth.


Why then is word of mouth the ultimate marketing strategy? And the irony of it as it costs you nothing to spend but costs you nearly all if you’re on the wrong side of it.


There is a key to it. That elusive element of trust.


Nielsen studies show that about 90% plus of “consumers believe recommendations from friends and family over all forms of advertising.” Mckinsey group behavior considers it the “primary factor behind 20 to 50 percent of all purchasing decisions.”

land-img-canadaPeople usually value opinions they get first hand. Most marketers spend millions to craft the perfect campaign only to realize it pars too far from what most consider as the credible opinion they are familiar with, unbiased and most likely have used the product and service in question. With too many options available, just a familiar word of [someone trusted’s] mouth is often enough to cut through the noise of choices.


Word of mouth is not a “eureka” anymore. Now its context has evolved within the social media. Blogs, user content, comments, retweets, shares among many are also considered varied forms of it. Perhaps the main concession is the speed that is now used to propagate the extent of this phenomenon. Available platforms carry the exchange at almost real time speed across millions [say Twitter followers or status updates] of people at a time.


Communications is key to a long-term relationships. And not only to personal ones, but even to businesses. Digital Promotions included.

Have your focus on your Customer’s focus on their customers. In so doing, you play up the strengths on strengths.

Sounds gibberish? It is deliberately written that way. True enough the first key is to make sure your client knows all too well their own customers.


This is part of you providing lasting value. The more you know, the better you can serve. The more you know, the more customised, appealing, compelling and effective would be your digital promotions. And isn’t it all about results?

It is also very common that  nobody wants to be sold anything, so capitalising on that make sure that you are doing the selling in the least intrusive way. Make it appear you are not! How? By mastering the art of business (9)promotions that is customer focused.


This in turn allows you to grow your client’s business. And when they realize you are a good growth partner, wouldn’t that make it long lasting partnership in the long run?

So no mysteries here, it is quite simple. Listen to what their customer’s heartbeat is. Peruse the comments, know their searched words, see which blogs elicit the most numbers of visits etc. This is the base of your ongoing conversations with the customers.