Innovative Strategies For Competitive Markets

Customers demand that businesses give them something new in our constantly changing world.

The way to do that is with innovative strategies. However, this results in releasing more than 30,000 unique products each year

—and about 95 percent fail, according to Harvard Business School professor Clayton Christensen.  

At the same time, many businesses need help coping with a fiercely competitive marketplace

or need to rely more on current customers. Some are reluctant to make changes because of potential risks.

The solution to many of these problems is incremental innovation –

– rather than radical or disruptive innovation– to improve their value proposition continuously and, subsequently, their overall results.

What is incremental innovation?

Incremental innovation is a series of company product or service improvements.

There are two basic types of innovation: incremental and radial. 

Incremental innovations are when companies make small changes to existing products

through incremental improvements to the business model to improve customer retention and marketing.

These developments also help improve efficiency, productivity, and competitive differentiation. 

Radical innovations transform the business model altogether. It transforms an existing system,

design, or invention into something new. These innovations can change parts of the system or the entire production process.

Radical innovators create an entirely new market for their products.  

However, only some products or procedures are brand-new ideas. Most new product

s are alterations or new applications of existing products, with some twist in design, function, portability, or use. 

For example, Apple didn’t invent the mobile phone but kept innovating it over the years.

Now it’s one of the world’s most profitable companies.

In a large study by McKinsey & Company, they were told by business leaders that many companies

were putting less emphasis on radical innovation and more focus on incremental innovation. 

These companies focus on improving their significant products, exploiting known opportunities, conserving cash, and minimizing risk.  

However, they concluded that more urgent actions are required in turbulent times. For example,

  1. Adapting their core products and service to meet changing custom

2. Identify and quickly respond to opportunities created by these market changes

3. Restart their innovative programs and allocate resources as needed

4. Develop products and services to be ready for post-crisis recovery.

 Examples of Innovation Strategies For Competitive Markets

Gillette had created and patented a unique razor handle and inexpensive replacement blades.

They upgraded the handles with innovations like pivoting heads. When the patented handle expired,

hey replaced the expensive handle with a cheaper one and sold “improved,” more expensive blades.   

Coca-Cola has been innovating and staying relevant with line extensions for over 100 years.

For example, Cherry Coke, Coke with lime, and Diet Coke. They have remained relevant as trends change.  

Apple iPhone was introduced in 2007 with few features. Here are a few examples.

From small metal flip phones to glass with touchable features, from 3G to 5G to small phones to large,

multipurpose phones with cameras to thousands of apps so you can even do your banking on the phone, 

 Focus On Your Entire Business Model

Often, incremental innovations focus on the company’s specific product or service. This focus is fine,

but I suggest starting with your business model and examining every area within that model

— plus your competitor’s business model. Look at every value proposition of your offering, brand, and more.

Another strategy is to set up a schedule for each iteration. When implemented, you will have a period of exclusivity.

Then hit your competitors with another significant improvement.

When you have gone through your entire business model, your competitors will find it difficult to copy your value-price offering. 

Or look at improving just two or three areas and implement them.

Then come back and innovate another two or three areas several months later

and not only impress your customers but also drive your competitors crazy and make it hard for them to copy you.

Creativity

Entrepreneurs work with two types of thinking. Linear thinking—sometimes called vertical thinking

—involves a logical, step-by-step process. In contrast, creative thinking is more often lateral,

in which established logical thought patterns are purposefully ignored or challenged. 

According to Wikipedia, lateral thinking indirectly solves problems using a creative

approach where the reasoning process is only sometimes obvious. It involves ideas that may take time to be noticeable. 

Lateral thinking involves ideas that may only be obtainable with a step-by-step approach.

It solves problems using an indirect method. Rather than going from A directly to B,

you start from a different place, not on the A to B road. 

You begin at location C, which is lateral (at an angle) to the A to B road.

This process causes your mind to think of new, different ways to reach your destination at B.

It is a powerful way to generate very creative ideas. You can learn more about lateral thinking

from Edward De Bonos’s book, “The Use of Lateral Thinking,” or our blog on lateral thinking.

Edward De Bono also links lateral thinking to humor, where your mind has to switch from

a familiar pattern to an unexpected one that generates surprises and new insights.

This innovative thinking process is a powerful creative tool worth your time learning.  

 The Benefits of Incremental Innovation 

Instead of risking radical innovations, many companies are now pouring their development

budgets into incremental innovations. Also, many customers prefer upgraded products

over radical new products. This incremental strategy gives the company additional cash to work toward radical innovations.   

An incremental innovation strategy enables you to retain your market share by staying relevant.

But you also have to understand what your clients want. For example,  

 Incremental innovations allow you to stay ahead of your competition while taking negligible risks

and using limited financial resources. Customer satisfaction with your offering creates customer retention. 

Radical innovations are essential to an organization’s long-term strategy,

but short-term upgrades to existing products keep customers interested in your business.

If you keep the products you have now without keeping them up to date,

you could be in trouble as the economy and markets change in the future.

Conclusion

With our constantly changing economy and a competitive marketplace, the solution is

to develop an incremental innovation strategy. These small and often frequent changes help improve efficiency,

customer retention, and competitive differentiation. Apple is a perfect example of how to do it.  

When looking for areas to improve, be positive in your approach. Don’t focus on problems.

Focus on the opportunities that will result from your efforts. Also, broaden your perspective and use both vertical and lateral thinking skills.

The benefits from this incremental innovation can be powerful and include:

Staying relevant to your market, Improving your growth with minimal risk, and retaining clients longer.

Protect yourself from a changing economy and marketplace. Innovative Strategies For Competitive Markets

Steps To Create Incremental Innovations?

Step One: Start by studying your current customers and competitors. Include their business models.

Step Two: Look at all the modules in your business model. Don’t ask, “What’s wrong?”

Ask, “How can I make this module (product, price, performance, Etc.) better?

When you are looking for ideas, keep your questions positive. Focusing on the positive will result in positive answers. 

Step Three: Select a reachable, measurable objective and do the research needed to expand that objective. 

Step Four: Get several ideas for each module. The more modules you examine,

the stronger your innovation will be. Select which idea you will implement

(this may be challenging because you may only be able to execute some of your ideas simultaneously.

Step Five: Make sure you have the time and resources, test it, then iterate and try again.   

Cheers. 

Jim Zitek

Also, check  “How innovative strategies drive sales.” and “Want a creative solution to an unsolvable problem.”

                                   Innovative Strategies That Create More Profits           

              ClickVisor Program

                       Harborcapitalgroupinc.com

Want To Make Your Marketing More Effective?

Close the efficiency gap between strategy and marketing 

Reaching revenue goals, for most companies, is very difficult. According to Reflektive.com, 90 percent of companies do not meet their goals. Why?

They do not have an effective business growth strategy.

There is often a gap, difference, or disconnect between the business growth strategy and the company’s marketing messages.

They are often not identical. Consequently, this gap damages sales and marketing results.

To close that gap, you must first create business growth strategies to generate revenues.

Why? Because your business strategy is your story. Marketing is how you tell that story. 

A strategy looks simple when you look back at it.

Here are a couple of examples:

BMW designs, engineers, builds, and sells “The Ultimate Driving Machine” (for that unique slice of the upscale car market).

Walmart: “Save Money. Live Better.” They created a strategy to chain-link an operating system

to get the population density needed to serve small towns with brand choices and lower prices in larger city stores like K-Mart.  

Netflix: “See What’s Next” anticipated the power of cloud computing and its ability to reach individual computers and individuals.

They pivoted from a disc rental company and created a new video-streaming strategy for the world’s homes and businesses.

Today, business growth strategies must generate more revenues.

Market boundaries do not have to stay permanent. 

Most business leaders accept market boundaries and industry conditions are fixed.

The assumption is that it’s always been that way.

Therefore, you must strategically choose between differentiation OR low cost to succeed.

But you can’t do both: add value AND lower costs.

This belief hurts product and market innovation for companies in very competitive markets.

We have learned from professors and strategists like Richard Rumelt’s Good Strategy/Bad Strategy

to rule breakers like Chan Kim and Renee Mauborgne‘s insightful Blue Ocean that this belief is false.

You just need to be more creative.

What is true is that strategies have been crippled by believing this value–cost trade-off rule is impossible.

Consequently, this viewpoint narrows your perspective and limits your potential product and market opportunities.

We are not just talking about creating disruptive technologies.

We are talking about competing in very competitive markets.

You can shape your market boundaries.

Innovative strategies enable you to create your own boundaries to generate revenues.

You can shape your market boundaries and target customers,

creating differentiation (more value) and lower costs. Here are a few examples:

Southwest Airlines broke the industry “hub and spoke” model and flew direct routes to smaller airports.

They have been the only consistently profitable U.S. airline since its inception.  

Apple broke the industrial computer market by introducing a beautiful, easy-to-use computer for individual consumers.

That worked pretty well.

CitizenM Hotel created a “five-star hotel” experience with four-star prices

by eliminating the things “five-star” customers didn’t care about,

like lobby check-ins and a concierge service.

And then added in items they did care about,

like King size beds, better mattresses, cotton sheets, and better pillows.

As a result, customers told their friends, and the hotels became an instant success.

Disruptive technologies’ successes often go viral.

More money is made from adapting those technologies

New technology is important and disruptive technology is and should be well rewarded.

But history shows that “big” money comes from applying technology and creating new strategies and markets.

Some popular examples from the New York Stock Exchange are

Apple, Google, FaceBook (Meta now), Airbnb, and others exploited the new technologies. 

Therefore, if you have an open mind and a broad perspective, you can change how you see opportunities.

You can go from fighting fierce competition to creating a bigger market.

A market consisting of current buyers and previously ignored nonbuyers

who become buyers because of your unique, new business growth strategy.

  Are you tired of constantly fighting your competition?

Take your company to the next level with an insightful strategy.

If you are willing to entertain new ideas and are committed to involving your team, you can make it happen.

 Getting started on your insightful new business growth strategy could put you ahead of your competition.

About 70% of companies say they have a strategy, but only a few have an actual strategy.

The problem is their definition of strategy is goals or a mission statement.

Goals are mostly wishes without a strategic plan on how to achieve them.

Unfortunately, only 15% have real, achievable, measurable, specific strategies.

And of these companies with real strategies, about 40% still miss achieving their objective. Why?

Not because of the strategy but because the execution of the strategy is often neglected for many different reasons.

So, having a strategy AND executing it is important.

Also, because execution takes time, it can lose its priority. Success takes a long-term “team” effort.

On the positive side, if the team is included in the process,

they will become more excited as the execution becomes more and more of a reality.

How you can generate revenues and make your competition irrelevant.

Join our ClickViser program. We’ll help you step-by-step reach your objectives.

Join our “ClickVisor” program. This program was created to help you regardless of the stage your company is currently at,

from an entrepreneur to an established business. It gives you the information you need to create and develop each stage of your business growth strategy.

The stages follow this pattern:

Start by identifying the ONE, most important problem preventing you from your objective or opportunity.

Then research and diagnose the situation until you get that insightful solution.

Then, because everyone has limited resources (time, skills, money, etc.), deciding what the company will do and will not do, is based on your strategy.

And finally, define the coherent plan of action required to reach your objective. 

You can look for an innovative strategy solution within your industry and markets.

Or depending on market growth rates and/or competition, you can

look at your objective across industries and markets to include expanded markets

and current non-customers (future customers), which is often thought of as a Blue Ocean Strategy.

Three ways to create your business growth strategy and story.

From Do-It-Yourself to We’ll help you do it.

Everyone is pressed for time and needs a flexible schedule. Our job is to help you

get an innovative and effective business growth strategy –at an affordable price — that will help you reach your objective.

You can do that through the following three programs.

Option One: Use our ClickVisor  Coach Program.

This online digital program can be accessed at any time you have time.

The information is divided into modules: strategy, execution, marketing strategy, etc.

so you can get the information you need when you need it.

It also includes free email so you can ask questions.

Option two: The ClickVisor Advisor Program

This program includes the ClickViser Coach program plus telephone or Zoom calls.

We are only a phone call away if you have questions or need charity about a unique issue.

 There is an additional charge for this based on the time used.

Option Three: our Consulting Program.

The Consultanting Program includes programs one and two,

plus one-on-one sessions to help you through the entire strategy creation process.

This customized program is set up together. If this program interests you,

we will need to set up a phone appointment to discuss what needs to be done.

Conclusion

You will be ahead of most of your competitors just by starting your journey toward an effective business growth strategy.

Looking forward can seem daunting at first.

But, once you see your strategy, if done right, looking backward, the strategy looks simple and easy.

Even though the world is getting more complex and seems to be moving faster, we can help make it as easy and effective as possible.

If you have an open mind and broaden your perspective,

you can shape your marketing boundaries by creating differentiation AND low cost.

Join one of our ClickVisor Programs to get the critical information you need

to create your own business growth strategy and make your competitors irrelevant.

Remember, your strategy is your story, and marketing is how you tell that story,

Thanks for your time,

Jim Zitek

P.S. For more information, check out the blog post “Why your business growth strategy is your story.”

P.P.S. Also, look at “Innovative strategies for revenue growth: exploit market changes.”

How To Get Significantly Better Results In Less Time

No one has enough time, especially business executives.

We always try to do more, learn more, and produce more. 

But there are only 1,440 minutes in a day, and no one gets more time, no matter who they are. 

But there are ways to get much more done and get better results if you know how to use your time correctly.

The following is from author and entrepreneur Kevin Kruse’s book, “Leaders Have No Rules.”

Enjoy.

Start by asking yourself these questions.  

What do I love doing? 

What is my expertise? 

What do I hate doing? 

What do I do that isn’t a priority? 

Here is the first step if your goal is increased productivity and faster, better results. 

Get rid of the jobs you hate to do and those that are not a priority. 

If you hate doing them, you are probably not very good at them either. 

Plus, they take more time than they should. Time is not a renewable resource. 

Maybe someone in the company loves that kind of work and would be happy to do it. 

If not, hire someone from the outside to do it. That’s probably less expensive than you doing it. 

You have just saved time and used it on higher-priority projects like driving revenues and profits. 

Wait, there is another way to use your time more effectively. 

What if you closed your office door, turned your phone and email off, and told people not to disturb you for three or four hours? 

The result would be no interruptions, no time for meanless chit-chat, no distractions from emails that were not critical, and more.

Imagine four hours free of disruption –every day –what you could accomplish with that much extra time.?

I’ll bet significantly more than twice as much.

Conclusion

Now, you can focus on the priority jobs where you have the expertise. 

That’s how you become an exceptional leader that gets better results in less time.  

Jim Zitek

Harbor Capital Group

It is a short week, so I kept this short

Solve Their Problem, And The Money Is Yours.

 Many companies do not reach their revenue and sales goals.

A primary reason is that they jump right into marketing as a way to achieve their goal quickly.

Marketing tactics alone, while important, will not solve the customers’ problems. That’s your job. 

You need to tell prospects your real story, and the real story is your company’s insightful solution to their problem:

your business growth strategy. 

Your business growth strategy is your story. Marketing is how you tell your story. 

That’s the story you are passionate about because it solves their problem.

Solving their pain, as you know, is why you need a strategy first.  

 I think the “strategy is your story” line is from an article by Ben Horwitz

You need a strategy to solve your prospect’s problem to reach your goal.

Without a strategy, there is a big hole in your story.

You need to fill that hole. So, to get on track to meet your revenue goals, you first need a strategy (your story),

and only after you have your strategy can you effectively and passionately market your story.  

With a strategy, your product or service solves a targeted customer’s problem in a better or more desirable way.

Plus, a strategy includes a reachable and measurable pathway to reach your sales objective.   

A strategy also makes your marketing cost-effective.

Your message will target and focus on the specific solution the customer needs and wants.

There are five parts to creating an effective business growth strategy. 

 Following is a very condensed description based on Richard Rumelt’s book, Good Strategy/Bad Strategy.   

1. Understanding your goal and the number one problem in reaching that goal, then turning that goal into a specific, measurable objective.   

2. You need to diagnose the problem based on experience, research, analytics, and critical thinking skills, so the information is as objective as possible. 

3. Next, create new insights and concepts using creative thinking tools to solve the problem or take advantage of the opportunity. 

 4. Once you have the insightful solution needed, you need to define what the company will do and not do

This step is difficult because it means many” no’s” because of limited resources.

5. Finally, prepare a coherent plan to execute this strategy.

Now that you know your company’s growth strategy (story), you can begin telling that story.

But, your marketing program needs a strategy also because the market is very crowded.

And you have to stay coherent with your business strategy.

For example, about 70 million posts are made each month on WordPress  

So, how will you compete against all the other marketing messages?

You must be on page one or two of “Google’s” search results. 

Competition is stiff if you use inbound marketing like websites and blog posts.

You must have a strategy for your marketing programs, using the same process described above for the company strategy.

What can you say or write differently, uniquely, and on point with your strategy?

Most visitors do not go beyond the second page of Google’s results.

Therefore, you need a strategy to get your blog posts seen and then read.

And this problem exists for all the media. It’s not impossible, but it takes a plan and some time to accomplish.

Your marketing plan may include outbound marketing (like direct mail and advertising) and direct sales.

Most people are familiar with the different marketing platforms and programs, so I will not cover them here.

Allocation of resources

Strategy is also important because it requires you to allocate resources to the entire company program, including marketing.

Every company has resources that are limited for marketing also.

So, spend enough time and resources to make each program successful.  

Don’t put 100 dollars into ten programs because you want many leads.

You may have to put the $100 into one program and make that program successful.

Then you can expand into the next scheduled item.

With a business growth strategy, you can get measurable results.

Two words of caution

Marketing programs also take time, a precious resource, especially for “free” social marketing programs.

Also, marketing programs need to be tested and adjusted as required.

For example, $100 for advertising may need to be scheduled monthly to get the exposure frequency high enough to work.

Or you may have to plan $25 every three months. 

Also, focus on only the marketing plans and programs that support your overall strategy.

Every employee and every program must sync with your company’s business growth strategy if you want to deliver what you promise in your marketing messages. 

Remember, your strategy is your story, and marketing is how you tell that story.

The following are three ways to move your company forward and reach your goals.

If you want to create a business growth strategy or update your current story, Harbor has three ways to help you.

These three programs enable you to design and decide what you need and how much time you can devote to creating your company’s programs.

The ClickVisor internet program gives you the information you need anytime.

You don’t have to hunt for the info. Just click and learn.

Plus, new information is added weekly and monthly.

The data is divided into modules to access the information you want quickly.

Workshops discuss specific strategies like defining and articulating your value proposition.

Learning various innovative techniques to create new concepts and ideas, how to

create your Brand or differentiate your products and services, or how to

position your Brand against the competition to become the preferred choice.

Consulting Program is custom-designed to help you transform challenges into opportunities and

benefit from the power of business and marketing Strategies.

 They are one-on-one or team designed to help you through the entire strategy creation process.

If this program interests you, we will need to set up a phone appointment to discuss what needs to be done.

 Conclusion

There are many reasons companies move forward too quickly by spending money on marketing programs; just to be disappointed,

You need to have a strategy defined and in pace first.  Then you can create an effective marketing program.

If you take the time to get your strategy right first, you will save a lot of time and money

and have a higher probability of reaching your objectives.

To learn more about the concept of your strategy is your story. Marketing is how you tell your story;

go to our website: https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com. 

I would love to hear your thoughts on having a written business strategy. Comment here.

PS. You may also be interested in our blog post: How you approach problem-solving matters.

PPS. And this post also: How To Define And Solve The “Real” Problem

Thanks for taking the time to read this, and I hope it gives you some food for thought.

Jim Zitek

Innovative Strategies That Create More Profits

Business Growth Strategies To Increase Revenues

After a difficult two years, and maybe another challenging year coming up, it may be time to update your current strategy

or create a new strategy to help deliver revenues and profits.

These 7 effective business growth strategies to increase revenues can help you do that.  

 Your business strategy covers much more than revenues; no one would read a blog that long.

So the focus here is on business growth strategies that create revenues.

Before we get started, a word of caution, because of the current economic situation and rising inflation, you have to put all of these strategies in perspective.

You may have to cut some expenses to raise money to implement new strategies, these strategies, 

Also, it’s essential to focus on your long-term goals. All right, let’s get started.

1. Increase Market Share Or Market Penetration

Of course, the way to do this is to keep trying to sell more products or services to your existing market.

Go back to your basic strategy model and reevaluate the initial assumptions you used to create your strategy.

But, do it for a positive analysis (how may I increase sales to our market?),

and Don’t use a negative statement (why can’t I increase sales to our market?). You are looking for new answers, not excuses.

For example, you might consider adding additional products or services.

Focus on a few products and increase the promotional budget on other products.

You can lower your costs on some products and use the savings to invest in other products.

You can also resegment your markets with a special offer, maybe find different suppliers, can you improve any of your current products, and more.

2. Develop New Markets 

Developing new markets is an excellent way to expand your revenues.

Not easy, but worth the time it takes to analyze the opportunities.

Looking for new markets should be something constantly on your radar.

Anticipating future events and changes is a powerful way to leverage your growth strategy.

For example, Chan Kim and Renee Mauborgne’s book, “Blue Ocean Strategy,”

an analysis where you make a graph isolating each prominent feature of your company and your major competitors and the value customers put on each element.

This analysis quickly visualizes the differences between you and your competitors and should give you some food for thought.

You should get ideas on where to be more competitive and areas that may be open to new product entrants into the market.

3. Alternative Channels

You may already use different channels like LinkedIn, Facebook, Instagram, Twitter, and others.

Many other channels are now available, and the list is growing, including Parlor, Substack, and individual platforms.

Also, there are podcasts on every topic you can think of, and most are looking for people to talk to be on the show. 

Remember, however, that each of these additional channels will take a considerable time for you to use,

respond to and create material for use on the channel.

So, keep the number of channels in line with your available time.  

4. Product expansion

Product expansion is a great way to get additional penetration into existing and new markets.

Maybe it’s time to explore some of the product or service ideas you have thought about for some time. 

Also, you can use “creative design” to develop many new products or services.

You may not be able to think about new products and instantly come up with some ideas,

but you can use creative thinking tools. 

For example, anyone can use the “random word” tool and generate many ideas in minutes.

You pose a positive question and then use a random word (a noun) and apply the characteristics of that word to your positive question.

More information on this tool is available on our website and blog.

If you want to explore new products or services with a group of employees, you could use the “six hats” creative tool,

which is designed for groups and is much more effective than the old “brainstorming” technique.

You can also find more information about this innovative tool on our website and blog.

These creative tools are from Edward de Bono’s many books on creative thinking.

5. Market Segmentation

There is more to market segmentation than demographics.

Market segmentation is another practical possibility to achieve your business growth strategy.

If your market is large, you can use a different lens to look for new areas within that market,

like product purchases that go together, levels of usage, or psychographics or mindsets.  

If your market is small, you may be able to divide it into even smaller markets

or “splinter” markets by the customers’ own perceived product value.

For example, the auto industry is large but divided into many niche markets.

But, within these niche markets (e.g.luxury cars), there are splinter markets (they still have to be large enough to be profitable).

Think BMW, a luxury car for special people that want the “ultimate driving machine.”

Of course, you have to deliver that promise.

So, the entire company must sync with the strategy to deliver the promise.

And with a strategy, everyone should be in sync with the strategy.

Remember, your business growth strategy is your story, and marketing is how you tell your story.

Strategic Partnerships

Joining forces with other companies is one way to expand your reach and product capabilities.

Theis relationship should benefit both companies.

It could also be for reasons other than sales. You could get skills and resources that you don’t have and could use.

You could also go to act.com for additional information on the administration of working with many people.

This partnership could also be for sales. For example, you could exchange client lists or referrals to companies

with complementary products or services.

You are not in competition with each other; you complement each other.

Market Disruption

Market disruption means introducing a new product into a new market.

This idea started with Clayton Christensen and the concept of entering a new market with an inexpensive product and limited functionality. 

The large companies would ignore this new company because of its limited functions and low price, meaning no margin.

Then, the new company starts adding additional functions and value and, at the same time,

keeps getting more and more of the market.

Done right, in time, the company will become a significant player in the market.

Other business growth strategies

There are some other strategies out there that are more limited to specific kinds of businesses.

In other blog posts, we will write about these (like franchising and licensing deals).

Conclusion

The 7 effective growth strategies to increase revenues listed above are some of the ways you can become a more robust and profitable company

— especially in the challenging years ahead.

To stay on top of your market, it would be best if you continued updating your strategy

and anticipating new trends and opportunities to improve your business growth strategies. 

 Jim Zitek

PS. You might also be interested in our blog: Why your business growth strategy is your story

PPS. Also, check out: How To Turn Negative Problems Into Positive Results.

If you want to update your current strategy and need to create a new strategy, go to our website.

You can get started today for only $39 per month for three team members and no contract.

What Is Customer Lifetime Value? LTV

About 55% of companies with increasing revenues think customer lifetime value is “very important”, and 29% of companies with flat or declining revenues do not think it is very important according to a study by Hubspot. Which group makes more sense to you?

Here is why Customer Lifetime Value (CLV) is critically important. it determines how much you can spend to acquire a new client based on your current client’s profitability. It gives you a picture of your business’s short-term and long-term status and financial viability.  It is also an indicator of product-market fit, client loyalty, and recurring revenue from existing clients.

When you know what a customer will spend with your business over time, you can consider more options for long-term planning. Yes, it does take some time depending on the depth of information you need. For example, knowing what the customer lifetime value is for each market segment is also very important. If you are a SaaS company and need extensive information almost daily, there are companies like Baremetrics that have the measurement and management tools to get you to the depth of knowledge you need.

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 customer’s lifetime value? 

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: 

1. Increase the dollar amount of each sale to a customer. 
2. increase the frequency that customers purchases from you. , 
3. Try to increase the number of products or services you provide for your customers.
4. 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:

1. 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? 
2. Which products provide the most revenue and profits? Can you add value to your products and increase the price?  
3. 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 customer lifetime value.

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. 

Customer lifetime value 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.

Thanks for your interest. Learn more at our website.

Jim Zitek, ClickVisor Program

jzitek@https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com 

P.S. We would love to get your thoughts on CLV.  Also, sign up for our free blog  posts at: https://https://harborcapitalgroupinc.com/wp-content/uploads/2024/07/Braintopview-1.jpg.com

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