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Will You Add? - Customer Lifetime Value - CLV - What Does it Really Mean?
Hi all! I decided to do something new and different this time. Every day of this week, I wrote down some lines (sort of like a diary) with the idea of explaining the current events going on these days. I hope it helps you to get an idea of how the life of a job hunter (just like me) is like.Monday* I get up at 8am, it’s always hard to start a week but I am excited about what’s going to happen this week.* Made a phone call to Company A to re-schedule interview day and time.* Later in the morning, reviewing and studying Company B.* Have lunch and get ready for my interview.* At 2pm, Interview with Company B. (I l
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as In
One of the most powerful business marketing tools out there is on paper. These include pamphlets, portfolios, and business cards. Using all of them is a plus, but business cards remain the cheapest (and arguably most important) way to market your business. Launching a business requires money from the start, and many may seek to cut corners and save whenever appropriate without sacrificing the integrity of their business. Plus, with inevitable changes to contact information and design for business cards, it is important to save money. One site that offers free business cards is VistaPrint, a company that offers 250 free (has an $85 value)Business competition can
The hardest part of calculating CLV is figuring out exactly what your customers’ “lifetime” really is…. and the only accurate way to arrive at that number is by getting, storing and analyzing your customers’ data. Period. If you’ve been in business for a while, this should be easy to get, but if you’re a start-up you’re going to have to estimate this based on industry standards.
Although there are several ways to arrive at CLV, the easiest is to calculate:
1. The average length of time a customer stays your customer
2. The number of transactions that an average customer will have with you during that time and
3. The average dollar amount per transaction
Multiply these together and you’ll arrive at a usable number. But remember, junk in, junk out… so make sure your original numbers are accurate!
Once established, you can use your CLV as a benchmark for developing a realistic customer acquisition (or retention for that matter) budget. For example, let’s say you find out that your average customer:
1. Stays with you for 5 months
2. Purchases something from you 3 times per month
3. Spends an average of $2 per transaction
In this case your average CLV would be $30. Based on this, it would be foolish to spend even $20 to gain one customer… you’d be left with little, or no, profit (unless of course, your margins are outrageously high). On the other hand, your customers may hang in there for 22 months, spend $20 per transaction and purchase from you a greater number of times. Since your CLV would be much higher, you could afford to pay more to gain a customer. Again, the specifics differ widely and there are many factors to consider, Also note that this does not include any costs associated with preserving this customer relationship. In the real world these must be included.
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as Inv
Process…even the word itself has come to hold a negative connotation for many. With the plethora of conflicting information that has been written about process management combined with the nightmares we have all experienced as a result of bad process, many executives fear the pain associated with flawed process more than they value the benefits created by good process.Understanding what constitutes bad process is the first step in recognizing how to avoid business process pitfalls that plague many companies. Let’s start by examining the three main misconceptions related to process:1. Process is not a new software program or application. While toolsets ar
Although there are several ways to arrive at CLV, the easiest is to calculate:
1. The average length of time a customer stays your customer
2. The number of transactions that an average customer will have with you during that time and
3. The average dollar amount per transaction
Multiply these together and you’ll arrive at a usable number. But remember, junk in, junk out… so make sure your original numbers are accurate!
Once established, you can use your CLV as a benchmark for developing a realistic customer acquisition (or retention for that matter) budget. For example, let’s say you find out that your average customer:
1. Stays with you for 5 months
2. Purchases something from you 3 times per month
3. Spends an average of $2 per transaction
In this case your average CLV would be $30. Based on this, it would be foolish to spend even $20 to gain one customer… you’d be left with little, or no, profit (unless of course, your margins are outrageously high). On the other hand, your customers may hang in there for 22 months, spend $20 per transaction and purchase from you a greater number of times. Since your CLV would be much higher, you could afford to pay more to gain a customer. Again, the specifics differ widely and there are many factors to consider, Also note that this does not include any costs associated with preserving this customer relationship. In the real world these must be included.
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as In
In the past, we've, of course, had many occasions to make cash deals on our stained glass art and occasionally we've had a chance to barter our stained glass art for goods and services. Over the course of years, we've had some barters and trades that worked out well, but many trades seemed to go sour.Most started out with each party having the best of intentions to do right by the other, but our experience's were that each time the trade or barter was made, our stained glass went right out at the start of the trade and then we usually got our part of the trade after the fact. As a result, the folks we traded with were always sure of what they were getting, but
3. The average dollar amount per transaction
Multiply these together and you’ll arrive at a usable number. But remember, junk in, junk out… so make sure your original numbers are accurate!
Once established, you can use your CLV as a benchmark for developing a realistic customer acquisition (or retention for that matter) budget. For example, let’s say you find out that your average customer:
1. Stays with you for 5 months
2. Purchases something from you 3 times per month
3. Spends an average of $2 per transaction
In this case your average CLV would be $30. Based on this, it would be foolish to spend even $20 to gain one customer… you’d be left with little, or no, profit (unless of course, your margins are outrageously high). On the other hand, your customers may hang in there for 22 months, spend $20 per transaction and purchase from you a greater number of times. Since your CLV would be much higher, you could afford to pay more to gain a customer. Again, the specifics differ widely and there are many factors to consider, Also note that this does not include any costs associated with preserving this customer relationship. In the real world these must be included.
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as In
My background is in retail management - yes, running stores, from tiny ones you couldn't swing the proverbial cat around in, to huge three floor jobs. Yet there are some guiding principles which, like Giuliani did for New York, that make a difference on a smaller scale. Guiding principles which make a huge, possibly unseen difference to your customers and no less so to your employees.I'd like to suggest that, on the basis of 20% of the focus gives you 80% of the return, acting in just two areas of fine detail will make all the difference in a retail business.As they say - 'Retail is Detail' Presentation Making a difference in
3. Spends an average of $2 per transaction
In this case your average CLV would be $30. Based on this, it would be foolish to spend even $20 to gain one customer… you’d be left with little, or no, profit (unless of course, your margins are outrageously high). On the other hand, your customers may hang in there for 22 months, spend $20 per transaction and purchase from you a greater number of times. Since your CLV would be much higher, you could afford to pay more to gain a customer. Again, the specifics differ widely and there are many factors to consider, Also note that this does not include any costs associated with preserving this customer relationship. In the real world these must be included.
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as In
Binding machines are used for fastening loose pages, plastic covers, or fabric layers together using plastic or metal wires. Binding machine lubrication must be done frequently, even if the operator's manual does not indicate the need to lubricate every point.Binding machine lubrication must be applied to all parts of the machine that are in motion. Each point must be lubricated with a small drop of oil. Binding machine lubrication should be applied after every four or five hours of machine use.Before oiling, take off the cover and rotate the hand-wheel in the normal rotating direction to locate all movable contact points on the machine. Continue to keep
It is crucial that you understand your CLV and use it to guide your communication decisions! (A good book on this subject is Donald Lehmann and Sunil Gupta’s, “Managing Customers as Investments”… visit our website, www.StrategicMarketingAdvisors.com for a review and ordering information.)
3. Your specific goals, such as:
* Acquiring “x” numbers of new customers
* Increasing the number of current customer transactions
* Increasing the length of time your customers remain your customers
4. Proposed media costs and actual/forecast response and sale rates (you can find these out online or from any reputable advertiser)
Once armed with this information, you’ll be in a good position to choose. Here’s an example of how this might work. Let’s assume the following:
* I am a widget retailer
* My goal is to get 1,000 new customers this year
* I will get 200 customers whether I do “anything” or not… (for example word-of-mouth, walk- ins, etc.)
* That means, I need to acquire the remaining 800 using some form(s) of advertising
* I can spend $40,000 to “buy” these 800 new customers
* My CLV is $40
* After careful consideration, I decide to conduct a direct mail campaign
* Based on my careful research and experience, I know that I can sensibly assume that 1%
of my audience will respond by calling (called a “response rate”) and that 80% of the responders
will become new customers.
* Given this forecast and my goal of 800 new customers, I know that I’m going to have to mail out
100,000 sales letters.
* As luck would have it, the cost to create, print and mail one letter is 37 cents (using 3rd class
postal rates) which comes to $37,000… leaving me with a $3,000 “fudge factor”
So, let’s see where I stand…
1. The campaign cost is well within my budgeted amount of $40,000, my forecasts are reasonable based on industry standards and experience, and can realistically accomplish my goals. So everything is perfect, right? Wro
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