In a highly competitive business world, the Lifetime Value plays a central role in sustainable success. It enables companies to understand and manage the actual value of their customers. The term helps to think beyond individual transactions in order to visualise long-term relationships and the associated sales potential.
What is behind the Lifetime Value?
The Lifetime Value characterises the total value generated by a customer over the course of the entire business relationship. Unlike short-term sales figures, it takes into account future purchasing decisions, recurring orders and possible additional purchases. This provides a comprehensive view of how profitable a customer relationship really is.
In retail, for example, it has been shown that customers who regularly add products or purchase upgrades achieve a significantly higher lifetime value than purely occasional buyers. In the service sector, close customer loyalty through personalised advice and service can also increase value over time. Online shops that use personalised recommendations also increase their lifetime value through targeted cross-selling. Lifetime Value.
The benefits of Lifetime Value for companies
The Lifetime Value helps companies to optimise the use of their resources. While acquiring new customers is often cost-intensive, the value shows when investments in maintaining existing customers are worthwhile. It is essential that the lifetime value significantly exceeds the acquisition costs - ideally at a ratio of 3:1.
In practice, companies from a wide range of industries benefit as follows:
1. in e-commerce, analysing lifetime value can be used to identify specific customer segments that can be addressed through special campaigns and retained in the long term. This customer group spends more and generates sustainable sales.
2. in the case of insurance, the Lifetime Value This is crucial in order to provide long-term contract customers with suitable additional services and thereby increase the contribution margin.
3. in the automotive industry, intelligent customer loyalty measures, such as customised services or discounts on subsequent purchases, can increase repurchases and customer loyalty, which in turn can increase the value of the customer. Lifetime Value measurably increases.
BEST PRACTICE with one customer (name hidden due to NDA contract)
This example illustrates how a medium-sized retailer can optimise its Lifetime Value by means of personalised newsletter campaigns and targeted product recommendations. The targeted approach led to an increase in the repurchase rate of 25 % and significantly improved customer satisfaction and loyalty.
Strategies for increasing lifetime value
The increase in the Lifetime Value is achieved through various measures that optimise the value of each customer relationship over the entire period. The following impulses are frequently used:
- Customer loyalty through excellent service and a personalised approach
- Cross-selling and up-selling with complementary or higher-value offers
- Use of CRM systems to analyse customer data and create individualised marketing measures
One company from the technology sector, for example, recorded an extension of the customer relationship by an average of one year following the introduction of a CRM-supported customer loyalty programme. Lifetime Value increased significantly. In fashion retail, too, personalised recommendations make it possible to offer matching accessories so that customers buy more frequently and with a higher shopping basket value.
BEST PRACTICE with one customer (name hidden due to NDA contract)
A consulting-intensive service company addressed its regular customers via targeted cross-selling of premium services. The loyalty increased significantly. Subsequently, sales with existing customers increased by 30 %, which Lifetime Value significantly increased.
How to calculate the lifetime value in concrete terms
The calculation of the Lifetime Value is usually based on the following components:
- Average order value
- Repurchase rate or purchase frequency
- Duration of the customer relationship
- Customer acquisition costs (CAC)
To calculate the value, simply use the formula:
Lifetime value = (sales per purchase × purchase frequency per year × customer relationship duration in years) - acquisition costs
Practical tools such as Google Analytics or special CRM programmes help to record and evaluate the data precisely. This allows each customer or segment to be evaluated with pinpoint accuracy.
BEST PRACTICE with one customer (name hidden due to NDA contract)
An online shop for home textiles used Google Analytics to analyse its Lifetime Value. The findings made it possible to focus on profitable customer segments. The marketing strategy was then adapted. This led to an increase in the average purchase value per customer and an extension of the customer relationship by several months.
My analysis
In summary, the Lifetime Value an essential key figure for long-term corporate success. It provides a holistic view of customer relationships and uncovers unrealised potential. Companies that focus on the Lifetime Value They manage their investments more consciously and benefit from loyal customers in the long term.
iROI-Coaching is at your side as a competent partner. We provide targeted support for strategic measures to increase the Lifetime Value and thus your entrepreneurial growth.
Further links from the text above:
Customer Lifetime Value (CLV): Definition, calculation & advantages[1]
How to increase your customer lifetime value quickly[2]
Customer Lifetime Value: Customer value more important than ever[3]
Shopify Customer Lifetime Value: The ultimate guide[4]
Customer Lifetime Value: definition, calculation and practice[5]
For more information and if you have any questions, please contact Contact us or read more blog posts on the topic internet Return on Investment - Marketing here.
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