Determining Customer Lifetime Value

If you want to become a professional marketer, you should learn about the customer lifetime value. This number should be calculated properly, so you are able to increase your business performance effectively. When you calculate this value, you should be able to find some great opportunities to reach your loyal customers easily. This calculation is very effective to help you find some loyal customers in your business. You have to serve these loyal customers, so they are going to purchase other products or services from your company regularly.

There are some important factors that should be considered when determining this value.

1. How long a customer remains active

It is important to determine the average duration of the customer to remain active with your business. Loyal customers usually want to build a long term relationship with your business. They usually have long duration when they remain active to build good relationship with your business. Different types of businesses and customer segments nay have different variations in this factor. You have to calculate this period very carefully, so you should be able to find the average duration for your customer to stay around your business.

2. Annual contribution per customer

This is another important thing that you have to consider when determining your customer lifetime value. When you have high contribution from the customers, you should be able to increase your profit effectively. In order to check this value, you should check all products or services that are purchased in certain period of time. You can calculate the total contribution that is created by your customers. You also need to consider other factors, such as cost to serve and cost to acquire. These cost factors should be considered when you are calculating the total annual contribution from your customer. Loyal customers tend to have high annual contribution by spending their money on your products or services.

3. Value of referral

When you are planning to calculate the lifetime value, you should also take a look at this factor. This value of a referral is calculated to determine some positive impacts given by some loyal customers. It can be used to calculate the total referrals that are made from certain customers. Most business owners are interested to learn about this factor. It is an important thing that you should know, especially if you want to promote your products or services via referral program. Your customers can become your passives, detractors, and also promoters. When they are satisfied with your products or services, they are going to become promoters for your company.

Those are some important things that you have to consider when determining the lifetime value. This value is very important to determine your business performance. You should be able to analyze your sales performance by looking at this value. Some experts believe that all business owners should take a look at this value, so they can find some loyal customers who spend their money on their favorite products or services. If you want to be successful with your business, you should learn how to calculate the customer lifetime value properly.

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James Mello
James is the Lead Author & Editor Product2Market of Blog. James writes for the Product2Market blog to create a source for news and discussion about some of the issues, challenges, news, and ideas relating to Product Marketing.
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