What is your customers’ worth?
Why do you need to care about their lifetime value?
Does it matter?
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| Tricky Case of Calculating Customer Life Time Value |
Every
marketer’s dilemma is “which half of my marketing spend” is working and
understanding customer lifetime value is a crucial part of marketing team’s
role. Customer Lifetime Value can be defined as the profit that the company gains
on each and every transaction that a customer makes during their association
with the company.
Every
company needs to understand the customer lifetime value for its customer base
for a number of reasons.
·
It helps the marketing team in estimating the
budget for new customer acquisition.
·
Provides the marketing team with a model to
understand who the most valuable and least valuable customers are.
·
Marketing Resource team can plan retention or loyalty
programs to retain the most valuable customers.
·
By having a positive relationship with the
most valuable customers, the company will benefit as it will get word-of-mouth
marketing and new customers from referrals.
·
It will also help in identifying least
profitable customers and decide whether to encourage them to spend more through
specific promotions or lose them if you are bleeding money on them.
