What is lifetime value?
In business terms, the lifetime value or (LTV) is the monetary value or worth that you can gain from a customer with respect to their relation with your company.
The Lifetime Value is a very strong human resource and financing indicator. Although, it heavily relies on estimation, but it provides with a clear picture of the number of customers that you can achieve in the years to come, and how beneficial it is for you to gain a clientele. In addition, it provides a cost benefit analysis (CBA) of whether should you gain customers, and the costs of gaining a customer.
Frequently asked questions
What is lifetime value?
Customer lifetime value, i.e. CLV or LTV, is one of the key statistics that allow you to track a customer as part of customer service. It allows you to determine how valuable a customer is to your company based on the entire customer-company relationship. This indicator helps companies develop strategies for acquiring new customers and retaining those who have already bought something.
How to calculate lifetime value?
To calculate the long-term value of a customer, you first need to calculate the average value of the purchases they have made and then multiply that number by the average frequency of purchases. This is how you determine the customer's value. In the next step, you have to multiply it by the client's life expectancy.
How to improve lifetime value?
There are several considerations for increasing the customer's lifetime value. First, you can deliver valuable content that engages your customers. Secondly, efficient customer service will be a key issue here. It's also critical to listen to your customers as well as offering them a personalized experience.
Maximizing customer lifetime value is key to business success. Deliver valuable content, efficient customer service, and personalized experiences.
Why customer support and loyalty initiatives are worth the investment
Customer engagement and loyalty are critical factors in business success. Engaged customers who have positive experiences with a brand are more likely to become loyal evangelists, driving referrals and generating new business. According to research, referrals from current customers generate 65% of new business. Providing excellent customer support is key to building long-term relationships and increasing customer satisfaction. This includes being responsive, efficient, competent, courteous, and consistent in communication. Businesses should also focus on creating unique value propositions that clearly communicate the benefits of their product or service and set them apart from competitors. Loyalty programs with incentives and rewards can also drive customer behavior and improve brand loyalty.
Customer Service – Social Media Tips
LiveAgent offers businesses multichannel customer support, including social media integration with platforms like Facebook, Twitter, and Instagram. This enables quick resolution of customer concerns and encourages positive user engagement, helping to maintain strong customer relationships and bolster a company's online reputation. LiveAgent also offers various customer service software options.
Value Props: Create a Product People Will Actually Buy
The video emphasizes the importance of defining the problem or opportunity a company is addressing in order to create a valuable solution. The value proposition framework involves three steps: Define, Evaluate, and Build. Michael Skok, a founding partner of Underscore VC, guides entrepreneurs through a series of frameworks to articulate and validate their value proposition. It's important to differentiate between users and customers and to focus on a minimum viable segment. Creating customer value involves setting a product or service apart from competitors through unique value propositions tailored to different customer segments. The text also offers resources for customer support and business growth.
Customer value has become a critical factor in the success and profitability of businesses. It refers to the perceived worth of a product or service to a customer, taking into account factors such as benefits, quality, ownership advantages, and differentiation. Understanding and delivering customer value involves creating unique value propositions that clearly communicate the benefits of a product or service and set it apart from competitors. Businesses must also tailor their value proposition to different customer segments, price their offerings appropriately, and focus on creating long-term customer lifetime value.