Lifetime Customer Value
The lifetime customer value is the total amount of value the customer spends with your business minus the amount of money (customer acquisition cost) that it took to get the customer. Every customer has a lifetime value and for your marketing to be profitable you need to know and understand it. For example suppose you own a restaurant, a customer brings there family in because of a direct mail coupon you sent out. The cost of that customer is the total amount spent on the campaign divided by the amount of redeemed coupons. Suppose the coupon mailer cost you 1200 dollars and you had thirty coupons redeemed in your preset time period, your cac would be 40 dollars per customer. Lets further suppose that your food is wonderful, the service is great and your customer returns at least once a month with their family; they spend an average of 100 dollars per visit. The lifetime customer value would be 1200 dollars minus 40 dollars for a total of 1160 dollars in profit. That conservative metric would make the coupon mailer a great deal. When you market and don’t track the results you have no idea if your money was spent wisely or not.
Ways of retaining customers that you have to increase your LTV
Here are a few suggestions on retaining customers, reaching out to past customers and maintaining your market share.
- Loyalty program, this will only work if your product/service is up to snuff and your customer service is where it needs to be. No amount of marketing will fix a substandard product or bad customer service. Using the restaurant example, when customers come into your restaurant and as their experiencing your great service ask them to sign up for your loyalty program. This can be as simple as adding there name and address to a spreadsheet and mailing them a coupon postcard every month. This is a perfect opportunity to keep a list of customers that already love your product, you just have to prompt them to come in more frequent.
- Cross sell or up sell while there there. The old would you like fries with that may seem silly but it makes McDonalds millions every year. Offer your customer a discounted desert or a drink special. Let your creativity run loose here.
- Run a direct mail campaign to your targeted list and also run saturation mailing in your neighborhood. You can also combine direct mail with online ads such as Facebook advertising to dominate your market.
It this hectic time where we are constantly being bombarded by digital advertising you have to find a way to stand out and differentiate yourself from your competitor. For help or questions about how direct mail can increase your lifetime customer value message us on Facebook or give us a call at 614-843-2259.
