What is your customer lifetime value (CLTV) and why is it so damn important.
Do you know your customer lifetime value (CLTV)? If not pull up a chair as this metric is SUPER IMPORTANT to understand and even more important to support growth, tailor business offerings and form a concrete plan.
CLTV is the metric that indicates the total $$ or value from a single customer over the predicted lifespan they use your company.
How to Calculate:
One of the simple methods I use to calculate for myself and my clients is this...I will use a corporate florist as an example.
1. Calculate the average purchase value ($120 per week).
2. Multiply that number by the average purchase frequency rate to determine customer value. ($120 x 48 weeks a year = $5760 a year from that one customer)
3. Calculate average customer lifespan multiplied by customer value to determine customer lifetime value. (say on average most clients stick with you 3 years) 3 x $5760 = $17,280 Florist corporate clients CLTV would be $17,280.
4. I also like to deduct the cost involved in securing them (ad's, incentives etc) and also any yearly maintenance costs involved to keep them). Say it took $250 of advertising to secure that corporate client and $150 a year (x3 years) to maintain them (maybe christmas gifting etc) = $700.
Therefore $17,280 - $700 = $16580 total CLTV from EACH corporate florist client. 💲💲💲
That's a lot of moolah..!
It's from understanding these metrics that you can then begin to understand the true value of good client relationships, the true value of great marketing, branding and client experience and the true value of always looking to grow your CLTV.
How to increase:
Reward your customers i.e loyalty programs, free shipping, free add-ons, your time and energy, referrals etc
Have a solid onboarding system to make them feel confident, loved upon and build trust. Also ensure that you are reaching back out to enquiries to support them and build relationships early on.
INCREDIBLE customer experience - keep looking at ways to add value, refine your services and products, talk to their needs.
Keep showing up with VALUE packed content and support - don't attract them and then go AWOL. Keep showing up on social platforms, in their inbox through newsletters of support (without getting too hot and heavy haha) and ensuring they have questions answered in timely fashion.
Offer payment plans or options for high ticket products or services to help them continue to invest. Also look to bundle items together for a reduced cost.
Look for passive income opportunities - can you introduce some passive income streams that work in with your client needs but also help maintain them e.g recommending a software that will support them and also financially benefit you (be authentic in this and only recommend what you truly think will bring them value).
Increase the $ of your current products or services and simultaneously increase the value you provide.
Diversify your offerings to include additional products and services - even ebooks, online course, templates etc
Look at your website and see if you can build out functionality to offer them complimentary products at checkout, free shipping, free support for 21 days etc)
Don't overwhelm clients with too many options - keep your offerings clear and succinct. This is the same for product based business.
