Customer acquisition cost or CAC is the value of the price you pay to acquire a new customer. And getting a new customer is more expensive than keeping one.
But with CLV, you can avoid spending more than what your new customers can afford.
Plus, using CLV will help you figure out how much you can spend on acquisitions without compromising your profit margins.
Improve Marketing Strategy
Now that you have well-defined prospects and you know the buying capacity of your existing customers, you can build campaigns based on their interests. Keep your customers informed and engaged by offering valuable content, whether through email marketing, social media or blogs.
Plus, with CLV, you can pinpoint customer pain points, so you can effectively market the positive impact of your product or service instead of just highlighting the features.
Find and Invest in Profitable Customers
Knowing what your ideal customer is, you can tailor your offer to suit their needs. You can create targeted campaigns and generate ads that will best capture your most profitable demographic.
CLV Insights also allows you to see which customers are losing money, so you can strategize to turn them into profitable buyers or devise ways to remove them from business altogether.
But as the business grows with the help VP Technical Email List of technology, data and information become more accessible. Now, businesses are re-imagining CLV around the customer journey, and not just looking at touchpoints.
They also dive into customer behavior that influences CLV changes across the customer’s journey with the business.
This means that CLV is more useful and effective for long-term marketing planning.
Advantages of CLV
In a competitive industry like e-commerce, seamless transactions will put you above your competitors. This is where you can use CLV. This is where you can use your CLV insights:
How to Calculate Customer Lifetime Value
When you talk about lifetime value, you’re looking at the entire customer journey with your business. This includes how, why, who, and when.
As mentioned before, you look at the average order value (per customer), the frequency of purchases, and the age of the customer.
To calculate CLV, you first need to calculate CW Leads customer value by multiplying the average purchase value by the average number of purchases.
Basically, CLV is the product of three components: Traditionally, businesses and marketers have used CLV to segment their customers so they can find tailored engagement strategies.