Why Customer Lifetime Value Is So Critically Important

Posted on October 26, 2021 by harborcapitalgroupinc

Why Customer Lifetime Value Is So Critically Important

Customer lifetime value (CLV) is an important business metric. It is the total revenue your business earns from a customer over time. It gives you a picture of the business’s short-term, long-term status, and financial viability. It is also an indicator of product-market fit, client loyalty, and recurring revenue from existing customers.

CLV gives you an understanding of the costs and profits of your business as it relates to acquiring, generating revenues, and retaining customers. Also, getting repeat orders from existing customers brings in a healthy cash flow regularly into the business. When you know what a customer will spend with your business over time, you can consider more options for your acquisition budget.

There are two basic ways of calculating CLV, depending on what data you have available.

1 Accumulated data

If you have historical sales data, this method is far more accurate. It puts together all orders by individual customers to get their own real CLVs.

2 Average estimate

If you don’t have granular data, you can estimate an average by the following formula: Average order value times number of orders per year.

How to calculate Customer Lifetime Value

For instance, if your customer base will, on average, buy ten times per year at $10 per transaction (or $100 per year) for ten years, the lifetime value of a customer is $1,000 (minus costs). If your profit is 25% of sales, the CLV is $250 (25% of $1,000). Therefore, you could technically afford to spend $250 to attract a single new customer. However, many marketers suggest that you do not spend more than 33% of CLV or, in this example, would be $82.50.

Another view. If you could improve each of the three CLV numbers by 10%, you would increase profits by 33 percent, giving you a profit of about $332 (plus $82). This additional profit could then be added to your marketing budget to grow even faster the following year.

Now, how can you improve each element of your CLV?

Now that you know the lifetime value, you want to spend some serious time examining how you can improve your revenues and profits. This information will also give you a long-term look at your business and help you plan for the future. To improve your results, you should do the following things sequentially:

Increase the dollar amount of each sale to a customer.
increase the frequency that customers purchases from you. ,
Try to increase the number of products or services you provide for your customers.
Then, you can begin to increase your market share by going outside — to increase your market share by working on your competitor’s customers.

This process also forces you to look at different market and customer segments. For example:

Who are your best customers and worst customers using CLV? How can you get more of the good customers and maybe less of the lower value customers?
Which products provide the most revenue and profits? Can you add value to your products and increase the price?
Which industry or market segments provide the most or least CLV? Are you in the best markets, best niches, and aiming for the best clients?

You also want to generate many alternative ways to increase your CLV

Now, you can focus on developing many alternative ideas and practices to increase your CLV. You want to focus on your overall business strategy, potential innovations, and marketing strategy. More information is available on our ClickVisor program to help you accomplish these crucial tasks.

Consider Multiple Marketing Approaches

This process also requires you to expand your marketing approaches based on the industries, segments, and types of customers. It is also a good idea to have more than one marketing approach that you continue to use long term. You need to try and test different approaches as the world, and people change.

CLV will change as you create and implement new programs

As you implement your marketing program, this lifetime value should change as the variables in the process change. So, reviewing your CLV regularly make sense. It will cause you to rethink many things you’re doing as you are always looking for ways to improve that number.

Conclusion

Client Lifetime Value is an essential concept for every business. It goes hand in hand with customer repeat orders and retention. It is also a great concept to broaden your thinking about your company and its mission. Plus, businesses with a high CLV can service their client better and grow continuously over time.

Contents Leadership/Execution

Posted on October 18, 2021 by harborcapitalgroupinc

START HERE> This Post is the table of contents for the Execution module. Please review the articles you want to look at and click on the article. It will take you to that article. You can then click back to this page and select another article you want to read or re-read, You also have the option to simply read all of the articles as they were posted on this module.

If you have questions, you can email us from the contact. Also, if you have a suggestion for an article you or you think others would like information about, email us and we will look into it. You can email us at https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com/contact-us

Contents: Execution

Execution

Management

Productivity

Raising Funds

Business Plan

Regulations

Prepare To Deal With New Regulations On Privacy Protection

Table Of Contents: Business Model

Posted on October 18, 2021 by harborcapitalgroupinc

START HERE> This Post is the table of contents for the Business Model module. Please review the articles you want to look at and click on the article. It will take you to that article. You can then click back to this page and select another article you want to read or re-read, You also have the option to simply read all of the articles as they were posted on this module.

If you have questions, you can email us from the contact page. Also, if you have a suggestion for an article you or others would like information about, email us and we will look into it. You can email us at https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com/contact-us

General Business Model Information

The Business Model Canvas

Part Two: Design Your Business Model

Part Three: Test And Verify Your Business Model

Reverse How You Develop Your Business Model For Better Results

Success Depends On Knowing Which Market Type You Enter

What Does Customer-Centered Mean?

Which Is More Important: The Product Or Market?

The New Startup Model

The Customer Development Manifesto

Prepare To Deal With New Regulations On Privacy Protection

Customer Segment

Why Customers Not Products Drive Successful Companies

Customer Relationships

Positioning: A Competitive Breakthrough

7 Ways To Sell Subscriptions

Table of Contents: Presentations

Posted on October 18, 2021 by harborcapitalgroupinc

START HERE> This Post is the table of contents for the Presentations Module. Please review the articles you want to look at and click on the article. It will take you to that article. You can then click back to this page and select another article you want to read or re-read, You also have the option to simply read all of the articles as they were posted on this module.

Core Story

Why A Core Story Is Critical To Your Success

Preparing Presentations

How To Start Preparing Your Story

Persuasive Presentations Get Results

How To Get Audience From Point A (skeptic) To Point B (convinced)

Every Presentation Is Mission Critical

A Quick And Effective Way To Tell Your Story

Structure and Flow

How To Find The Structure And Flow Of Your Presentation

Reverse The Customer’s Risk And Increase Sales

Posted on October 14, 2021July 27, 2024 by harborcapitalgroupinc

Reverse risk is a technique you should test. It will make your product or service more desirable than your competitor’s.

Most companies hedge their “guarantee.” They don’t want to assume the risk. They are afraid the customer will want their money back. Yet, a solid guarantee is the easiest, most immediate way to a cash flow bonanza.

Your “iron clad” guarantee tells your customers that you’re willing to stand by what you say. It means your customer that you are confident that your product or service’s quality will meet their expectations — but you need to make sure it does.

Suppose a customer returns the product, rather than being disgruntled, graciously and readily give them their money back. In that case, The customer will gain confidence that your word is good, making it more likely they will purchase a product from you again because it’s easy to return what they don’t want, and you will be pleasant about it.

Also, it allows you to upsell your customers. It is also a prime opportunity to find out about the product or service they didn’t like and will enable you to offer them a product or service that will better serve their needs. You can also turn a bad situation into a good one.

Here is another way to look at risk reversal

The longer the guarantee is, the less likely it is that a customer will return the product.

If the product has a 1-day trial period, you’d better believe that during those 10 days, the customer will be hypersensitive to the product or service and its performance. They want to make sure they don’t get caught post the deadline, so they scrutinize and evaluate it before the 10 days are up.

Suppose the industry norm is 50 days; set your offer apart by offering a 60-day guarantee. Chances are, the customer is going to decide whether he’ll keep your product during the first week or two. Very few would determine that maybe the product isn’t for them on the 51st day.

This risk reversal idea will work for all types of businesses. If you are skeptical, test it out and see for yourself. If you can’t do it for legal reasons, you may be able to find a different way to execute this risk reversal idea.

How can you reverse the customer’s risk when he is thinking about buying your product? This would be a great question to work on using the random word technique in the strategy module.

Follow Up, Then Follow Up Again

Posted on October 14, 2021 by harborcapitalgroupinc

Each time you do a mailing, follow it up with a summary of the offer with another mailing or postcard for the people who didn’t receive the first one. Give them some sense of urgency and a Call-to-action. Then, five days later, follow with a phone call if possible. This process will boost response.

Because you are following up, you will be able to inform them of the available new or additional products.

Let them know you appreciate their initial business and that you are trying to keep them informed. This continuous follow-up will deepen their comfort level. And they will begin to see you as a friend. Adding this personal touch will pay off big at the cash register.

When you plan your follow-up, it can be by email, phone, or mail. Regular mail is more expensive but is unusual compared to text and email.

Never let a customer walk away and never contact them again. If you assume they are not interested, think again. It may be they didn’t want to buy on that day, but today they are ready. Maybe they need more information; perhaps they didn’t have time and wanted to mull it over a while. Maybe they have saved up some money.

If you show them how simple it can be, take care of most of the transaction, and simplify the process, more of them will buy from you.

Try following up several times with different ways to follow up. Let us know what happened or if you found a better way to followup up.

Work Your Customer List First

Posted on October 14, 2021 by harborcapitalgroupinc

Work Your Customer List First

The first thing you should do to improve revenues and profits is to work on your customer list. However, there are situations where going outside may be more lucrative. It all depends on your situation.

Once you determine the lifetime value of your customer, you’ll want to spend as much money as you need to, but never more than a lifetime value of the customer, to get as many new customers as you can.

For example, if the lifetime value of a customer is $50 per year and you don’t do anything to sell them a second time, you have a limited budget. However, if you can upsell them to $75 and you can get them to three purchases a year ($225), all of a sudden, you have four times the marketing budget.

When you have four times the budget, you can run ads when your competitors can’t, you can offer lucrative sales commissions, you can do promotions when competitors can’t, they don’t understand where the profit is, but you do.

Next, you can “out package” your competition.

You can add more products or more value to your proposition to get new clients. Find and talk to a joint venture partner and explain the concept of “lifetime value.” By explaining the concept of “ lifetime value, “ you can convince them to give you (either free, for cost, or less than cost) products and services with a high perceived value and high-profit margin.

They will give you these products because you will be able to convince them that for every ten people you give their product to, as a bonus for buying your product, they’ll get two or three new clients with potential long-term, ongoing revenues. This idea will enable both of you to do incredible deals. You both get more clients with a potentially good lifetime value.

However, you’ve got to give them the information they need to embrace the idea. Walk them through your proposal and acknowledge and identify all the inherent negatives and fears and then overcome those fears. When they understand how the backend works, it will make sense to them.

Another Strategy Is To Joint Venture With A Competitor

The idea is to acquire a competitor’s customer list that they don’t recognize as valuable. Ask them to give you the names of their inactive customers or ask for the customers who have canceled. Or that they couldn’t convert. Offer to reciprocate with a dollar amount per name or share of the profits.

Your competitors may have spent thousands of dollars building their list. For you to share your profits with them will save you time and money. And for them, they would never have tried to reactivate these people or customers. So from what they saw as lost customers or prospects, they could now make thousands of dollars quickly.

Conclusion

These are ideas to think about. You can modify the types of companies and products (offerings) in many different ways. If you use this strategy.

Let us know how it works.

Why Marketing Strategies Are So Important

Posted on October 13, 2021 by harborcapitalgroupinc

Most people think the thing to do when cash is tight is the cut down on their marketing budget, assuming they don’t have the money for marketing. That’s the wrong approach. People often think this way because their marketing‘s not generating the kind of revenues they thought. This negative thinking is shortsighted. You have to rethink what you’re doing.

Marketing is the lifeblood of any business. Without effective and measurable marketing, all companies will suffer. Refocus your efforts on marketing your business, and you’ll have a better chance of success.

Your company has to be seen as the only logical solution to your customer’s problem to build success. That’s a marketing challenge, not a quality challenge or a product development challenge.

Competition is a fact of life. But start focusing on marketing as the most crucial purpose in your business. It is possible that marketing alone will give you the revenues and profits needed to meet your goals.

The essential function of a business is marketing and innovation. Everything else is an expense. Innovation is defined here as offering more value to a customer. Your primary job then is to attract customers.

The Problem

Most business people spend their careers in one or perhaps two fields at most, and their experts in this field create a form of myopia or tunnel vision. All they know is the basic approach to business and marketing the people in their industry practice. They probably have no familiarity with different successful techniques and strategies that drive other industries.

One Solution

Suppose you learn 10 or 15 ways other industries market and added them to their own very myopic marketing. In that case, they could transcend and catapult their company above their competitors. And instantly turn their tunnel vision into a funnel vision Dash funneling profits directly to their bottom line.

This section on marketing strategy will cover strategies different industries use to generate revenues. You will want to try one at a time and then measure and test your results so you can keep improving them.