Lifetime Value of Customers to You
Compared to traditional business models, subscription businesses offer significant benefits to the customers and merchants. From the businesses’ perspective, one of the most important metrics to focus on is the customer lifetime value as this determines the ultimate long-term trajectory of the business. But first you might be wondering, what does customer lifetime value actually mean?
Defining Customer Lifetime Value
Customer Lifetime Value, or CLV, is a metric that helps businesses measure the total revenue generated from a particular customer over the period, or “lifetime,” of that customer’s orders. In other words, you add up all the revenue from all of the orders from a particular customer, and that total amount is the CLV. As such, the longer a customer avails of the subscription of your company, the lifetime value increases.
How can You use CLV
Understanding the importance of CLV can help a business in two main ways: (1) maximizing the performance of your marketing spending and (2) resource allocation.
- Maximizing Your Marketing Spending
Ever wondered if your marketing strategies are really maximizing your marketing investments for the best possible benefit? Implementing subscription models can be a big boost to maximize your marketing ROI (return on investment). The main edge of a subscription model is to increase retention rates — the percentage of your customers that come back and repurchase over and over again. You get a much higher benefit from your marketing spending if your customers subscribe and continue purchasing in the future!
- Resource Allocation
Once you are able to segment your customers according to their lifetime value, allowing you to better grasp the importance of each customer, you can allocate more resources towards both the acquisition and maintenance of certain customers. Customers with a high lifetime value can receive more resources because you know they are particularly valuable for your business.
Get in touch with our friendly HelixPay Team to find more about how we can unlock your e-commerce potential!