Customer Lifetime Value (CLV) is a significant factor in business success, but not all businesses are keeping their attention to it. Many businesses do not spend time to measure it and others don’t even have a clue of what CLV is.
What is Customer Lifetime Value (CLV)?
Customer Lifetime Value (CLV) is a metric that shows the total revenue a business gains from a single customer account.
The CLV acknowledges the customer’s revenue value and associates it to their predicted customer life span. By understanding the CLV, businesses can segment customers better based on how valuable they are to the overall business.
Customer Lifetime Value and Value Ladder
The value ladder is all about customer lifetime value. Basically, think of how much money are you making off from each of your customers? If your business does not repeat customers and is only serving a customer once, then there is something wrong. That means you are always chasing for customers to come in instead of waiting for them to visit your store again and again and increase their value as customers.
Acquiring new customers are one of the most difficult stages of business and most costly too. Therefore, if you don’t do something to increase the average value generated by each of your customers, your business will be in big trouble.
A value ladder is a strategic map that helps you lead a client or customer from a mindset of “I had no clue you existed” to “I trust you and your business” state.
It allows you to deliver value at each step of your customer’s journey.
The value ladder will help you to envision a path of service/product continuity. Therefore, by understanding the Value Ladder, you can then map out a way to increase your Customer Lifetime Value. Once you master this concept, you will open up a new world full of endless possibilities.
Without a value ladder, it’s often challenging to learn how to market your business long-term. With it, recognising the gaps and creating strategies to help you win them is clearer.
How does Value Ladder Works?
With the value ladder in mind, you are covering all bases and making sure that you render the most value to your customers. By doing so, you increase your impact, your customers’ lifetime value and your revenue all at the same time.
If you are only offering a single service for one price, you could be leaving behind on money and revenue.
Let’s put it this way, you sell a single product for a fixed $50 price and let’s say you have three potential customers.
Customer 1: He has $50. He bought your product. Great!
Customer 2: He only has $30 in his budget. Now, if you don’t have other option then you would lose $30.
Customer 3: he has $250 ready to spend for your service but since you only have a product for $50, you would then lose the $200.
Based on the above examples, if you don’t cater to all of these potential customers, you lose money either way.
So what can you do today?
Assess what your product offering looks right now. Map out your services or offers based on the level of value and then identify the gaps where you can improve your offers, cater to all possible customers while applying the concept of ladder value for continuity.