Why are we always so focused on getting more leads, more traffic, and more new customers? Sure, we always need new people to discover our business and offers, but we should be paying more attention to the customers we already have! Many entrepreneurs overlook the importance of increasing customer lifetime value (CLV).
Knowing and maximizing your CLV can unlock your profit potential and help you scale your business over time. In this post, we’ll explore what CLV is, why it’s important for course creators, and how to increase it.
What is customer lifetime value (CLV)?
Customer lifetime value is the amount of revenue a customer is expected to generate throughout their relationship with your business. It’s a crucial metric for understanding the long-term value of your customers and helps you make informed decisions about how much to invest in acquiring new customers.
To calculate CLV, you’ll need to estimate the average customer lifespan, the average purchase value, and purchase frequency. The formula for CLV is:
CLV = (Average Purchase Value x Average Purchase Frequency x Average Customer Lifespan)
Why is customer lifetime value important for course creators?
Understanding CLV is crucial for course creators because it enables you to make smarter marketing and business decisions. By knowing your CLV, you can invest more in customer acquisition and retention, optimize your pricing strategy, and identify growth opportunities.
Additionally, increasing your CLV can significantly impact your bottom line. By retaining customers for longer and increasing their lifetime value, you can boost your revenue without having to acquire as many new customers.
How to calculate customer lifetime value
Calculating CLV can seem intimidating, but there are several tools that can make it easier. If you use ThriveCart, for example, you already have a lot of sales data at your fingertips. You just need to use it!
Alternatively, you can use a tool like Fathom Analytics to track your customers’ behavior over time and help calculate their lifetime value. This approach is especially useful if you have a lot of data to work with and want to optimize your marketing efforts based on customer behavior.
How to increase customer lifetime value
Now that you understand the importance of CLV and how to calculate it, let’s look at some strategies for increasing it. Here are a few actionable tips to get you started:
1) Improve customer experience:
By providing excellent customer service and ensuring that your customers have a positive experience with your brand, you can increase their loyalty and encourage repeat purchases.
2) Offer upsells and cross-sells:
Encouraging customers to purchase additional products or services can increase their lifetime value and boost your revenue.
3) Focus on long-time customers:
Retaining existing customers is often more cost-effective than acquiring new ones. By prioritizing your long-time customers and offering them special incentives, you can increase their loyalty and lifetime value.
4) Use marketing automation tools:
Platforms like Drip and Deadline Funnel can help you automate your email marketing and create personalized campaigns encouraging repeat purchases.
5) Don’t forget about tripwire offers:
The quickest and easiest way to have a new lead become a customer immediately? Have a tripwire on the thank you page after they sign up for a freebie or lead magnet. Learn how to create your first tripwire and get a free Thrivecart tripwire sales page template here.
Customer acquisition cost (CAC) vs. customer lifetime value (CLV)
Another essential metric to consider alongside CLV if you are running ads or spending money on marketing is customer acquisition cost (CAC). CAC is the cost of acquiring a new customer, while CLV represents the revenue generated by that customer over time.
By comparing these two metrics, you can determine whether your marketing efforts are generating a positive return on investment.
Ideally, your CLV should be significantly higher than your CAC. This indicates that you’re generating more revenue from your customers than you’re spending to acquire them, which is a key indicator of a healthy business.
Measuring customer lifetime value with KPIs
You can use key performance indicators (KPIs) to track your CLV over time. Here are some KPIs to consider:
Customer retention rate: This metric measures the percentage of customers who continue to purchase from your business over a given period. A high retention rate indicates that your customers are loyal and engaged with your brand.
Average purchase value: This metric measures the average amount of revenue generated by each customer per purchase. By increasing this value, you can boost your CLV and revenue.
Purchase frequency: This metric measures how often customers make purchases from your business. You can increase their lifetime value by encouraging customers to make more frequent purchases.
By tracking these KPIs over time, you can identify areas for improvement and optimize your marketing and business strategies accordingly.
Tools to help you increase customer lifetime value
Finally, there are several tools and platforms that can help you increase your CLV and grow your business. Here are a few worth considering:
ThriveCart: If you’re a ThriveCart user, you have a lot of sales data. Make sure you’re exporting this data into something like Airtable, Google Sheets, etc., so you can use it. You can click into any customer in ThriveCart and see their CLV amount.
Fathom Analytics: This tool can help you track customer behavior and calculate lifetime value a lot easier than using Google Analytics.
Drip: This email marketing platform offers features to help you automate your campaigns, segment your audience, and create personalized messages that encourage repeat purchases. Heads up: Drip is one of the very few email service providers that integrates natively (aka no Zaps needed) with Thrivecart and can track customer lifetime value for you automatically.
Deadline Funnel: Scarcity and countdown timers work; there’s no doubt about it. Using Deadline Funnel is an excellent option for using countdown timers in an ethical way.
ConvertBox: Along with Deadline Funnel, ConvertBox is a great tool for offering special discounts and offers to specific website visitors. These are in no way the normal annoying ‘can’t wait to close this’ pop-ups. They actually convert! I also use ConvertBox in so many other ways – to let folks know about current promos, to keep in touch with my students, and so much more. Read my full review of Convertbox here.
By introducing even just a few of these tools and strategies, you can increase your customer lifetime value and better serve your customers too.
