customer lifetime value

Not all customers are created equal. Nor do they have identical buying habits and buying preferences. While some customers transact with your business or purchase a particular product once or twice, others become customers for a lifetime. Yet, even lifetime customers are differentiated from one another, mainly through the amount of business they bring to the company. In order to determine how much each of your customers is worth to your company, you need to have at least a basic knowledge of CLV or Customer Lifetime Value. CLV is also valuable in measuring the effectiveness of a marketing or promotional campaign or a customer loyalty program using bulk gift cards or other promotional items.

Understanding CLV

In business marketing, Customer Lifetime Value or CLV is an approximation of the net profit obtained by a business from its lifetime relationship with a customer. Simply put, CLV is how much a customer is worth to your company. There are many tools available that measure CLV, although the percentage can be determined manually by factoring in your annual marketing expense, annual number of customers, and the number of purchases a customer makes within a specific period.

Marketing experts often differentiate between two forms of CLV, which are historical lifetime value and predictive lifetime value. Historical lifetime value measures revenue per customer, while predictive lifetime value estimates how much an individual will be spending during his or her entire lifetime as a customer.

Why CLV Is Important

Although you may be inclined to pinpoint your inventory as your biggest business asset, marketing experts are quick to say otherwise. For them, it’s the customers that comprise the biggest share of any company’s asset pie. This fact alone makes CLV critically important in maintaining business stability and driving long-term growth.

Since the annual report usually does not show the worth of each of your customers, measuring CLV will provide you with the information you need in retaining your customers and keeping them happy. Calculating CLV will also allow you to measure the effectiveness of marketing plans and promotional programs.

Designing Promotions for Customer Loyalty

Improving CLV can be done through effective customer retention programs that keep your customers right where they are — with you. A well-planned customer reward program will be helpful in engaging your customers and driving them to do more business with you. The right offerings and promotions, such as a promotional gift card, can go a long way in making your clients feel valued and appreciated.

In the same way that your business needs to rise above the competition, the most loyal of your customers will also stand out from all the others. Clearly, your most loyal customers are the ones that give your company the best Customer Lifetime Value. While there are many factors that influence a desirable CLV, promotional programs such as gift card promotions, can help drive Customer Lifetime Value and create loyal customers for a lifetime.

Planning to use wholesale gift cards or include rebate promotion for your upcoming promotions strategy? Talk to us at Mpell Promotions so we can get started today.