Online Business Help

  Homes arrow Online Business Help arrow Customer Lifetime Value - the Key to maximizi...
 Webmaster Tools
Base64 Encoding 
Browser Settings 
CSS Coder 
CSS Navigation Menu 
Datetime Converter 
DHTML Tooltip 
Dig Utility 
DNS Utility 
Dropdown Menu 
Fetch Content 
Fetch Header 
Floating Layer 
htaccess Generator 
HTML Encoder 
HTML Entities 
IP Convert 
Meta Tags 
Password Encryption
Password Strength
Pattern Extractor 
Ping Utility 
Pop-Up Window 
Regex Extractor 
Regex Match 
Scrollbar Color 
Source Viewer 
Syntax Highlighting 
URL Encoding 
Web Safe Colors 
Forums Sitemap 
Weekly Newsletter
Developer Updates  
Free Website Content 
 RSS  Articles
 RSS  Forums
 RSS  All Feeds
Write For Us 
Contact Us 
Site Map 
Privacy Policy 
  >>> SIGN UP!  
  Lost Password? 

Customer Lifetime Value - the Key to maximizing your profits
By: Developer Shed
  • Search For More Articles!
  • Disclaimer
  • Author Terms
  • Rating:  stars stars stars stars stars / 0

    Table of Contents:

    Rate this Article: Poor Best 
      Del.ici.ous Digg
      Blink Simpy
      Google Spurl
      Y! MyWeb Furl
    Email Me Similar Content When Posted
    Add Developer Shed Article Feed To Your Site
    Email Article To Friend
    Print Version Of Article
    PDF Version Of Article




    Customer Lifetime Value - the Key to maximizing your profits
    by Larry Lim

    The greatest asset to your business is your Customer, specifically, your Customer Lifetime Value.

    In my many years of Sales and Marketing, I've met many CEOs and business owners who don't have much clue as to what Customer Lifetime Value is, much less its importance and the impact it has on their bottomline. To most of them, what matters most is to increase revenue by continuously acquiring new one-shot customers.

    This's one of the fatal mistakes that many business owners make; it's a sad scenario, but it's also the reality. Let me tell you something: it'll cost you 5 times more to attract a new customer than it is to bring one of your past customers back to you.

    I don't know you personally, but if you're a smart business owner, you'll understand that every cent you invest in advertising is going towards acquiring new customers. You'll also realise that once you've acquired the customers, you just can't afford to let them go.

    So what's Customer Lifetime Value?

    Customer Lifetime Value is defined as the total value, in monetary terms, of your average customers spanning the entire period that these customers are likely to do business with you. It's the potential contribution of your customers to your business over a period of time.

    Here's how to calculate your Customer Lifetime Value:

    1). Let's say you've 2,000 steady customers and these customers remain with you for an average of two years; for the past two years, your net profit was $700,000.

    The Customer Lifetime Value can be calculated as: $700,000/2,000 = $350.

    What this means is that over an average customer lifespan of two years, each new customer you could acquire and keep is worth $350 to you in profits.

    2). If you don't have the actual figures, you'll have to estimate. As the Customer Lifetime Value will have a significant impact on your bottomline, my advice is that you be prudent and conservative in your estimation.

    Why is it so important to you and your business?

    Lifetime Customer Value is important to you and your business for the following reasons:

    1). Knowing the Lifetime Value of your customers is crucial to you and your business as it serves as a benchmark without which you'll be groping in the dark.

    When you know the Lifetime Value of your customers, you can determine how much time, effort and money you can afford to invest to acquire that customer in the first instance.

    In other words, you can invest more today to reap a much larger profits later down the road as long as your cash flow is healthy and can support it.

    Every marketing campaign that you undertake costs you money as well as reaping you benefits such as increased sales, enhanced corporate image, etc. But how can you be sure that the benefits would outweigh the costs or investments? This's where knowing the Customer Lifetime Value is so powerful - it helps you to determine this even before you launch your marketing campaign.

    2). When you realize that customers are actually an ongoing stream of revenue as opposed to a one-shot sale, you can re-focus your marketing efforts.

    Instead of contantly struggling to acquire more and more new customers, you can now begin to focus on keeping your existing customers longer and selling to them repeatedly, in other words, repeat sales.

    You may spend more like making stronger and more attractive offers than your competition in acquiring new customers now who'll be your money spinners tomorrow.

    This makes sense because you now know that on average you'll more than make it back over the years that the customers are with you and therefore you could afford to break even or even lose money now in acquiring the new customers.

    Start shifting your focus to Customer Lifetime Value and maximise your profits today.

    Start to have a proper understanding of Customer Lifetime Value because it's key to the success of your business. It'll allow you to acquire more customers than your competition through better and more attractive offers; it'll dramatically increase your bottomline through more repeat sales and shoot your profits through the roof.

    Copyright Larry Lim, MarketingSphere.

    About the Author

    Larry Lim is a practising marketing strategist and tactician who dishes out effective marketing strategies and tactics that will enable you to successfully start and grow your business on the Internet.

    Check out his website - - that is jam-packed with secret marketing information that will skyrocket your sales, and shoot your profits through the roof.

    Note: Free Content For Your Website and/or Ezine.

    If you'd like to publish the above ariticle on your website and/or ezine, you now have my permission to do so, provided that:

    a). The article is re-printed without changes, including the Byline(i.e. About the Author section).

    b). You send an email to informing me where you'll be publishing the article.

    Click here to have the article automatically delivered to you now.

    DISCLAIMER: The content provided in this article is not warranted or guaranteed by Developer Shed, Inc. The content provided is intended for entertainment and/or educational purposes in order to introduce to the reader key ideas, concepts, and/or product reviews. As such it is incumbent upon the reader to employ real-world tactics for security and implementation of best practices. We are not liable for any negative consequences that may result from implementing any information covered in our articles or tutorials. If this is a hardware review, it is not recommended to open and/or modify your hardware.

    More Online Business Help Articles
    More By Developer Shed



    - Social Media: An Analogy
    - Make a Digital Trail for Site Performance
    - Communication is Key Even in SEO
    - Look Past Your Web Analytics Blinders
    - Everything is Marketing
    - How to Be Transparent Online
    - Respecting Customer Privacy in Social Media
    - Testing Your Site For the Holidays
    - Speak Your Customer`s Language
    - Don`t Ignore Social Media
    - Focus on Business Goals, Not the Internet
    - Solve Problems to Make Money Online
    - Offering Coupons Without Alienating Customers
    - Build Relationships to Build Conversions
    - Online Reviews Matter More Than You Think

    Developer Shed Affiliates


    © 2003-2018 by Developer Shed. All rights reserved. DS Cluster - Follow our Sitemap