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July 13, 2007
What’s The True Cost of Customer Lifetime Value?
How often have you heard the phrase Customer Lifetime Value (CLV)? According to Wikipedia, the free encyclopedia with over 1.7 million articles, it’s “a metric that projects the value of a customer over the entire history of that customer's relationship with a company.”
But even if you’re unfamiliar with this phrase, don’t ignore the dynamics of marketing to your base. Politicians do this especially well. But no one does it better than the TV networks.
A few years ago, ABC was in last place among the big three. But now, by giving its base what it wants, Disney’s network has runaway hits like Lost, Desperate Housewives, Dancing With The Stars, Ugly Betty and Grey’s Anatomy.
In fact, many companies totally ignore the impact that loyal customers can have, when the benefits of increasing it are so dramatic:
> A 5% increase in retention can create an 85% increase in profits;
> A 10% increase can translate to a 20% increase in sales;
> Extending customer lifecycles by three years can triple profits per
customer.
As you’ve no doubt heard, it's difficult to improve what we cannot measure. So it's even more difficult to accurately project how much you should spend to acquire, service and keep your customers if you actually don't know their value.
But it’s ALWAYS far less expensive to reach out and market to your current customers than to your prospective customers. That's why tracking your CLV will help you –– and your organization –– find, keep and profit from the right customers.
Posted by MCorp. at 13.07.2007 16:51 | Permalink
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