Customer Value: Stand Alone Comment
Customer Value: Stand Alone Comment
Sometimes something in a comment stream deserves its own post.
Ammon Johns posted in the stream on The Midweek Zap - Brand Loyalty with Ronell Smith. https://goo.gl/qDvErk
The Comment
Ultimately, this is really about the essential difference between a business that simply tries to attract customers, versus a business that understands CLV (Customer Lifetime Value).
Attracting a customer takes a certain amount of investment, whether that investment is in advertising, or creating brand awareness, or public relations, or content marketing. This is commonly known as Customer Acquisition, and every business should know (and seek to optimise) its customer acquisition costs.
The natural extension to this is repeat custom - the customer we pay to acquire one time, who returns to buy from us again and again. Even if we actively invest in customer loyalty, with mailing lists and with loyalty rewards, and with discounts on the next purchase, these investments are typically less costly than that initial customer acquisition. It is cheaper to re-acquire a customer who happily bought from us before, than to acquire a customer for the first time.
Customer Lifetime Value goes just that extra step. It looks at how long a customer continues to repeat their custom, across how many subsequent purchases, and even factors in how many other people they refer to your business, either actively or passively.
By paying attention to, and seeking to understand the influences upon, that customer lifetime value, you can seek to extend and increase that value. The benefits are exponential growth.
A customer who buys a product from you twice a year for an average of 3 years before trying another brand, and in that time refers just one friend per year is giving you a lifetime value of 6 purchases and 3 free customer acquisitions (which also have a known value). If you can influence that average customer to stay loyal for just one extra year then the same customer now provides 8 purchases and 4 free customer acquisitions (each of whom will now also stay for an extra year, and refer an extra new customer).
#brandloyalty #brandstrategy #customerretention
https://goo.gl/qDvErk
Sometimes something in a comment stream deserves its own post.
Ammon Johns posted in the stream on The Midweek Zap - Brand Loyalty with Ronell Smith. https://goo.gl/qDvErk
The Comment
Ultimately, this is really about the essential difference between a business that simply tries to attract customers, versus a business that understands CLV (Customer Lifetime Value).
Attracting a customer takes a certain amount of investment, whether that investment is in advertising, or creating brand awareness, or public relations, or content marketing. This is commonly known as Customer Acquisition, and every business should know (and seek to optimise) its customer acquisition costs.
The natural extension to this is repeat custom - the customer we pay to acquire one time, who returns to buy from us again and again. Even if we actively invest in customer loyalty, with mailing lists and with loyalty rewards, and with discounts on the next purchase, these investments are typically less costly than that initial customer acquisition. It is cheaper to re-acquire a customer who happily bought from us before, than to acquire a customer for the first time.
Customer Lifetime Value goes just that extra step. It looks at how long a customer continues to repeat their custom, across how many subsequent purchases, and even factors in how many other people they refer to your business, either actively or passively.
By paying attention to, and seeking to understand the influences upon, that customer lifetime value, you can seek to extend and increase that value. The benefits are exponential growth.
A customer who buys a product from you twice a year for an average of 3 years before trying another brand, and in that time refers just one friend per year is giving you a lifetime value of 6 purchases and 3 free customer acquisitions (which also have a known value). If you can influence that average customer to stay loyal for just one extra year then the same customer now provides 8 purchases and 4 free customer acquisitions (each of whom will now also stay for an extra year, and refer an extra new customer).
#brandloyalty #brandstrategy #customerretention
https://goo.gl/qDvErk
It's a great concept I have used often and makes for a great jumping off point for some really good blog posts
ReplyDeleteHappy customers are repeat customers generally
ReplyDelete