Customer Lifetime Value and Engagement

Customer Lifetime Value and Engagement
Adaptive Pulse

Every day the business world is swarming with new metrics and the marketers must  understand these metrics and terminologies to keep up with the competition. Customer Lifetime Value, or better known as Customer LTV, is one of the most important metrics but unfortunately, many companies and organizations are oblivious of it.

So let’s try to understand what Customer LTV really is. In the simplest manner, Customer LTV could be understood as the total revenue a customer would bring to a company or business in the entire period as an active customer. In short, Customer LTV is the metric that gauges the worth of the individual customer for the company or business.

How To Calculate Customer LTV?

Now, as the importance of Customer LTV has become clear, let’s move on to the technique of calculating CLTV. It does not  require one to be a math genius to calculate the Customer LTV. One can calculate it by getting some very basic data of a company or one’s own business like average contract value, purchase frequency and average customer lifetime. By multiplying these three, one could get the Customer Lifetime Value. Although this is a very broad technique to find Customer LTV but it is effective in most cases.

$2,000 (monthly ACV) * 12 (months of purchase) * 3 (years of average retention) = $72,000 CTLV

Why CLTV Matters For Business?

As it has become clear that Customer Lifetime Value is an indicator of the span of customer engagement with the business houses and companies, it should not be ignored. Any e-company and e-business house, which is driven to stand out among the competitors, should strive to keep it above the Customer Acquisition Costs. The focus should lie in the betterment of Customer Lifetime Value, i.e., their engagement with the company for a long period of time. It will undoubtedly help the company in generating more revenue by converting a one-time customer into a regular one.

Every brand and businessperson knows that it is easier to sell products to regular customers than the skeptical newly arrived customer. If anything, Customer LTV precisely points towards that retention of the customer with the brand.

However, it is not child’s play to retain customers and convert a one-timer into a regular customer. For this, the company or the brand should be ready to engage with the customers in a productive way.

How Proper Engagement Could Enhance Customer LTV?

By better understanding the available Customer LTV, marketers should identify the possible future needs of the customers and start engaging with them accordingly. They could do so by improvising marketing programs that cater to the needs of the customers. Through the customer service operators, the company or brand could start engaging with the retained customers, informing them about the innovative latest products which were moderated according to their demand.

The marketers, however, should also keep this in mind while engaging with the customers that not all customers want to hear from the brand or company constantly.

Both Customer LTV and proper engagement are dependent on each other, and a better understanding of Customer LTV could build a good engagement rapport with the customers and vice-versa.

Feel free to reach out if we can help you with your qualitative customer intelligence or for a blog topic request to [email protected] or visit our How It Works page!

Adaptive Pulse

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