Blog : How To Select Profitable Customers Using Customer Lifetime Value

The famous saying already says that the one that covers a lot is not too tight. In online business, this phrase applies perfectly. It is better to concentrate efforts on selecting profitable clients with whom you have a greater affinity than reaching many at the same time because, at the moment of truth, you will not be able to satisfy everyone's needs.

So, as the Superman Manager that everything can not exist, it is best to measure your actions, resources, and available time to focus on insurance, to select profitable clients on the Internet. In an online or traditional trade, marketing actions are generally divided into two types: Capture: actions focused on generating sales through new customers. Loyalty: actions that aim to get repeat customers to buy from you. To select profitable customers, you must first carry out the recruitment phase. Once completed, you move on to loyalty. It is important that you focus on the clients that give you margin, but how do you know what they are? Through the lifetime value of the customer (Customer Lifetime Value).

How to calculate the Customer Lifetime Value? Determining the Customer Lifetime Value of your customers (CLV) will allow you to know precisely and measurably the benefits that you could obtain every time you manage to retain a new customer on the Internet. The calculation consists of determining the average profit margin that a client can generate for you throughout his life with you. There are many formulas to calculate it, but the simplest is: CLV equals average sale value X repetitions per month or year X average life of the client; Let's see it clearer with this example of a client of a Pilates center; 70 monthly fee X 12 monthly payments X 2 years of the average stay in pilates center is 1680.

Average sale value 70 monthly, Reps per year 12, Average Customer Life 2 years, Total Customer Lifetime Value 1,680.

The calculation of the Customer Lifetime Value, in addition to helping you select profitable clients, will provide you with a broad knowledge of your business, your products, and your market. But mainly it will allow you to make better and more accurate decisions regarding following things.

New customer acquisition costs, Balance between acquisition costs and profit margin per customer, Setting customer loyalty goals online, Average purchase improvement strategies.

Once you have been able to select profitable customers for your business, the next step would be to segment them and focus your efforts on loyalty. In one of my future posts, I will tell you about some tools that you can use to achieve this, but in the meantime, do not hesitate to contact us at 021bcn if you need help to attract and retain your online customers.