Using Customer Lifetime Value (CLC) To Grow Your Brand

Abigail Nwaocha
Apr 4 · 4 min read

How to grow your business with CLV

  1. Understand your business
  2. Get to know your customers/target market
  3. Calculate your CLV
  4. Use marketing strategies
  5. ­­SMS
  6. Push notification and mobile apps
  7. Popups
  8. Social media
  9. User Generated Content (UGC)
  10. Email
  11. retargeting

Understanding Your Business

In the business world, retaining, recognizing and rewarding your customers are very important for the growth and stability of your business.

Today, the market place is teeming with a myriad of brands. There’s a lot of information on how brands can reach and keep their target market. People switch brands as awareness, services and information needed are provided. The real issue isn’t merely attracting new customers but retaining them.

Knowing Your Customer/Target market

Statistics show that ‘repeat customers spend on average 67% more than new customers’.

It’s not new knowledge to marketers how expensive it is to bring in new customers. It is known that it’s easier and cheaper to build and maintain a current customer base than to go fishing for new customers who bring in less revenue. After all, the growth of a brand isn’t defined by the customer base alone but by the actual amount of revenue being generated.

Customer lifetime value is a highly underutilized and unappreciated metric. It’s a tool that proves very useful in building loyalty for brands among customers, bringing in new customers and even more. Most new businesses and brands shy away from CLV (Customer Lifetime Value) because of its seemingly complex nature and calculations. Not all business owners have business degrees but all wish for their brands to grow.

Customer Lifetime Value is used to calculate how much your business can make over the lifetime of your customers. In the textbook Marketing Metrics: the definitive guide to measuring marketing performance (Farris et al 2010), the authors defined CLV as:

‘Customer Lifetime Value is the dollar value of a customer relationship based on the present value of the projected future cash flows from the relationship’.

Simply put, the Customer Lifetime Value is a prediction of how much businesses can make, over the entire future relationship with a customer.

There are some key points to note about the Customer Lifetime Value.

  • CLV summarizes the total revenue and total cost related to a customer per time.
  • It is usually calculated per customer within a particular market segment.
  • It provides a net profit and loss summary of the customers’ total relationship with the firm.

Calculate your Customer Lifetime Value

Now we know what the Customer Lifetime Value system is. The next obvious questions are:

  • How do I calculate it?
  • How exactly will it help to grow my brand?

Let’s talk about the easiest way to calculate the Customer Lifetime Value of your business. One of the easiest infographics I have come across in understanding CLV calculations is from Kissmetrics.

If you take a minute to look at it, you should be able to do basic calculations on CLV.

If you thoroughly understand the diagram above then you will notice the basic rudiments of the Customer Lifetime Value. CLV basically ropes all the necessities stated below into an equation.

  • Average order value per time
  • Average purchases in a period of time
  • Average customer value over a period of time

These basic rudiments are very vital in growing your brand. This is because they direct you to the assumed weak areas and strong areas of your business.

The first step in using the CLV to grow your brand is carrying out a customer survey using information from sales.

You need to discover your most relevant customers. You can easily do this by separating customers into what is called POOLS. Your pools could be dependent on how much revenue your customers bring in or how often they make purchases.

It should be noted that both revenue and loyalty are important. For example, you can divide your customers into three categories;

  • Customers that spend over 1000 dollars weekly
  • Customers that spend 500–1000 dollars weekly
  • Customers that spend less than 500 dollars weekly
  • Customers that spend less than 100 dollars weekly

Your pools can go on and on. In doing this you are able to determine your loyal customers, those are the ones you should aim to maintain. It also helps you determine the customers who aren’t likely to come back and those that may need more incentives if they are going to become loyal. If you need to provide incentives you should do so.

Some great incentives are using loyalty programs whereby people get points for making purchases or even get points for inviting other customers. Getting enough points earns them a loyal status which comes with certain preferential treatments like discounts.

It’s also quite important to look for ways to connect with your customers on a deeper level. Usually, you’d find that the customers who are willing to check on the website or even use the helplines are loyal ones and are willing to engage in future relationships. It’s essential that you make these platforms exciting enough for people to enjoy and interact with.

The Growth Metric

Every business needs growth, but what constitutes growth? as marketers this is a question we must answer.

Abigail Nwaocha

Written by

Growth Marketing consultant for Startups, Small businesses & Agencies| lover of written art | LGBTQIA

The Growth Metric

Every business needs growth, but what constitutes growth? as marketers this is a question we must answer.

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