Four Tips on Extending the Lifetime Value of Your Customers

Your customers are your key assets – a saying that’s true to all kinds of businesses, whether business-to-consumer or business-to-business.

That is one reason why it may appear contradictory or counterintuitive to calculate what is referred to as the lifetime value (LTV) of customers. LTV is the total amount of money you expect a customer to spend on your brand, products, or services in their lifetime. Even though it appears contradictory or counterintuitive, it makes perfect sense.

LTV predicts and measures the profitability a given customer relationship will bring. This informs how much you are willing to spend to maintain the relationship.

So, how do we calculate the LTV?

Customer LTV is the average value of purchase multiplied by the number of times the customer will make a purchase every year multiplied by the average duration of the customer relationship in years.
Let’s break that down – If a regular customer who buys six 60-day bottles of your premium multivitamin for $50 each for 10 years would have an LTV of $3,000 as against a customer who buys a $7.00 box of your herbal tea once a month for five years, which would amount to a total of $420.

So, this gets you thinking – for which customers should you be investing more marketing dollars? Without a doubt, you would direct more efforts towards retaining (and possibly upselling) the premium multivitamin users.

Vincent Tricarico, EVP for NutraScience Labs and an expert in dietary supplement manufacturing, shares a golden statistic he still refers to today around custom retention: 80% of future profits come from 20% of your existing customers.

With over 20 years of direct-to-consumer and supplement manufacturing experience, he believes, when looking at avenues for extending the lifetime value of your customers, you need to keep the following concepts in mind:

• Provide outstanding, stand-apart customer service in multi-channels.
• Deliver content that is engaging and adds value outside of the goods and services you provide.
• Personalize your presentation – the more personalized your product line is, the more personal the customer’s experience is with your brand—the greater level of success you will have.
• Build meaningful relationships with your customers.

To learn more about each of the above-mentioned points, head to his recently published blog on Forbes and understand how you can create healthy relationships with your consumers.