Step 3: Integrate customer profiles and interactions
Analyze the prospective interactions and score them based on the customer profiles you created. Are they a good fit? Is there a high probability that you will actually close a sale? Then you probably already have an MQL.
Step 4: From Marketing to Sales
Your MQLs are not ready to buy right away, and each customer must be approached differently to get to that point. Just because a prospect is an MQL certainly doesn't mean you are guaranteed a sale. Therefore, sales must tailor sales plans to convince and encourage the customer to make a purchase.What is Customer Lifetime Value (CLTV or CLV)? Why do companies calculate it? If you know what your customers value, you can calculate how much they are likely to spend on sales and marketing activities. This applies to acquiring new customers as well as retaining existing customers.
What does Customer Lifetime Value mean?
According to Bauer, Hammerschmidt, and Braehler (2003), customer value is defined as the economic value of a customer to a company. Customer Lifetime Value (CLV) can be defined as the value of a customer over the entire time that the customer is a customer. Therefore, CLV measures the profit contribution of a customer over the entire customer lifetime.
Customer Lifetime Value is the arithmetic result of multiplying the purchase value of a customer's purchases (per year) by the number of purchases made during their entire lifetime.
Why do companies calculate CLTV?
Companies calculate Customer Lifetime Value to compare it to the cost of acquiring a new customer, the Customer Acquisition Cost (CAC). This is the amount of money a company spends to acquire a new customer. It includes costs for advertising campaigns and direct marketing, as well as costs such as sales, personnel, and (CRM) software.
Let's say that customer lifetime value is easier to calculate, because a customer will only buy from you once on average in their lifetime. You can then plot CAC against CLTV.
Does a customer spend 500 euros on average to buy from you once in their lifetime? On the other hand, does it cost 150 euros on average to acquire that customer? Then your profit margin would be 350 euros. As long as the purchase price and other costs per customer do not exceed that amount, you will be profitable.
By calculating customer lifetime value (like CAC), you know what a customer brings to the table, so on the other hand, you also know how much it might cost to acquire that customer.
Calculating customer lifetime value: the formula
There are many ways to calculate customer lifetime value, some complex and some simple. One of the simplest formulas is:
CLV = [average number of purchases per month] x [average profit per purchase] x [average number of months a customer stays].
Example: Let's say you sell business software and a customer uses it for 5 years. Then you can calculate CLTV as follows:
Average revenue per purchase (one-year license), e.g. 500 EUR
Average purchase frequency: once a year
Average customer relationship duration: 5 years
In this case, you sell a software license worth 500 thailand telegram EUR to an average customer once a year for 5 years. Therefore, the average customer value is 2,500 EUR. This is the revenue you can get from a new customer. What does it cost you now to acquire this customer? As long as the cost you pay now is less than the revenue you expect over the years, it will be worth it in the long run.
Gupta and Lehmann (2005) state that it is best to think of customers as both assets and expenses and treat them as such. Therefore, Gupta and Lehmann state that the value of a company can be expressed in terms of the value of existing and future customers.
Let's use the example from the book to calculate the value of a company. Here we assume that the average customer value of a company is $100 (CLV = $100) and that the company currently has 30 million customers. Then the value of current customers is $3 billion. Then use the customer acquisition rate and the CLV of current customers to make a forecast for future customers. This gives a value of $1 billion. Then the value of current and future customers is $4 billion, which is a good reflection of the value of the company.
Customer Lifetime Value: Targeting New Customers
An influential marketing myth is that it costs 6 to 7 times less to retain an existing customer than it does to acquire a new one. Even if this turns out to be true, as a company you can’t simply ignore all potential new customers.
If you are ambitious and want to grow quickly, you need new customers. Only if you attract enough new customers and retain existing ones can you serve your growing target market.