Customer LTV maximization: A guide

How much is each new customer worth to your business? How about the value of your long-standing and loyal customers? If you can retain one customer to the tune of $20,000 while another one only yields you $2,000, despite putting in the same amount of effort and attention to your customers, it will be time to rethink how you engage with these individuals and keep them coming back for more.

This blog will serve as a guide to introduce you to the idea of maximizing customer LTV that offer tips that you and your fellow stakeholders can begin to implement today.

Understanding customer LTV data

The actual amount of lifetime value (LTV) for your customers cannot necessarily be calculated with scientific precision. Marketing and sales can be more of an art in that regard.

But you can make good educated guesses about the LTV of customers, especially when you have been storing data about them for many years. Startups and younger companies won’t have as much information to go on, but you can still start making calculations about their motivations as soon as you begin gathering data in earnest.

Marketing Strategy offers an example of a customer with an LTV of $100, with the revenue coming in after a $45 acquisition cost, with a free trial to the company’s services for the first week. Then, the customer spends $20 per month for five months. You’ve earned $100 in sales at an acquisition cost of $45. While the first two months could seem like a “failure,” by the end of the five months, things will be looking better.

You multiply the transaction value by the number of transactions and the profit margin, according to Marketing Strategy. That applies to selling items. Let’s say your business operates on a subscription model. Then, you’d calculate monthly revenue multiplied by the number of months the customer subscribes for, multiplied by the profit margin.

Keep in mind that you really have to know your customers if you intend to calculate the LTV for each of them. So it pays to eliminate duplicate records in your database. The holy grail is to have a golden record database with a unified customer identity for each person you sell to. Suppose you are instead tracking customers by just their email addresses. In that case, you might inadvertently think two emails belong to different people, but they happen to be used by just one customer. This is the magic of a single customer view, and why it matters when it comes to customer LTV.

To help you get started, below are a few tips to help maximize customer LTV.

1. Obtain first-party data to understand what attracts customers to your business

Your customers can reveal a great deal of information directly, so you don’t have to be concerned about purchasing information from database marketers. Collecting first-party data from these customers enables you to create a clean, new database with exactly the kind of information you need to fine-tune your sales and marketing approach. And the better you cater to customers’ desires, the bigger the potential customer lifetime value you can anticipate.

2. Eliminate data silos

One bottleneck that many businesses run into, from smaller shops to large enterprises, is keeping their data locked up in separate silos. This makes it difficult for you to find actionable data on customers if the sales team has one set of information, while the help desk team is amassing a treasure trove of feedback about what products work and which ones need improvement, and so on.

Neglecting your loyal customers who are willing to stay with you and offer feedback is a recipe for disaster. So one of your first tasks in improving the lifetime value of each customer is to unlock the data and consolidate it.

3. Deliver custom experiences to high-value customers for better retention rates

You cannot treat every customer exactly the same way. That would be a fast way to squander your scarce resources. Opiniac explains that no brand can survive for long without developing some returning customers who are loyal to your services or products. With different customers come different motivations to shop and to buy.

So, you will want to study their interactions with your online platform and apply analytics to get to the heart of why they buy or don’t buy and when these transactions typically take place.

You can deliver customized web pages to customers based on their intentions and past behavior. Some customers might receive special invitations or different deals according to their longevity and loyalty. As you try other marketing experiments, it’s crucial to keep track of the data. Watch for new trends in customer behavior as you launch new campaigns or offer them unique experiences.

Maximize the value of each customer (on your site or setting foot in your brick-and-mortar store)

It would be ridiculous to put in much effort and time to cultivate customers, only to see them leaving your business before you have a chance to get much value out of their purchases. You may need some assistance managing information gathered on customers (or even help in obtaining these details in the first place).

At Lytics, we understand how to personalize marketing experiences and track customer intention and desire without compromising efficiency or customer trust. Connect with us today, or try Lytics free for 30 days, to see how your brand can be empowered to maximize the LTV of your customers.