CLV-it’s important for your marketing strategy

There is a big difference between a customer who makes a one-off purchase versus a customer who makes repeated purchases over a period of months or even years. The customer who makes small purchases more frequently will bring you more profit than the customer that uses a special discount to make a purchase and then stops buying from you. Therefore, understanding and calculating Customer Lifetime Value (CLV) is imperative for your marketing strategy.

So, what is CLV anyway? As a simple definition, CLV represents a customer’s value to a company over time. CLV helps businesses project the total revenue they can expect from a single customer when compared to the CAC (Customer Acquisition Cost). It gives businesses the insight into how long it may take to recover the cost of acquiring a new customer. Being able to analyze how long a customer has been a client, how many products they have purchased, what their annual spend has been year-over-year, means such insights and data points can be correlated with sales data to help drive customer retention and growth strategies.

To find the ideal customer and improve ROI (Return on Investment) for each marketing campaign, calculating CLV and using it in your client acquisition strategy is key. Instead of putting significant marketing spend behind a one-off customer purchase, understanding CLV, will show you that it makes more sense to nurture the client or customer who makes regular purchases. Additionally, if you can determine which clients are not purchasing as much as they usually do, you can quickly create a marketing campaign with discounted offers on their favourite products to help win back their loyalty.

Such tactics can help you reduce the number of lost clients over the course of the year. CLV means your customer base can be segmented by profitability, allowing you to spend more money on your VIP customers. Essentially, you can estimate your marketing budget with improved accuracy and determine how much money you should spend for each client group.

This marketing metric – CLV - is an important part of the marketing strategy and understanding it will help keep customers coming back!