Lifetime Customer Value: The Real Measure of Success

How do you measure the success of your marketing campaigns? Do you measure it by the initial sales? Marketers often run a campaign, then measure how well it worked by how much revenue it generated right away. But the value of a customer comes from more than the initial purchase. It includes any additional purchases made over the lifetime of that relationship. This is called the Lifetime Customer Value (LCV).

Why is LCV so important? Think about your loyalty to brands. What did you buy the time you purchased from one of your favorite companies? A $5 latte?  $30 blouse? $150 pair of hiking boots?

Now think about how much you have spent with that brand since then. How often do you go directly to their store or website simply because you like their products? Once a month? Several times per year? In the past 12 months, how much do you think you’ve spent? $50? $150? $1,000? If you’ve been loyal to that brand for years, what do you think is the value of your purchases in total?

Now, imagine that the company calculated the ROI of its initial marketing campaign only by the initial purchase. How much they would miss! This is why it is so essential to track beyond the initial purchase.  

Let’s look at three benefits of tracking LCV:

1.  Identification of your most (and least) profitable customers. 

There are many benefits to knowing who your most profitable customers really are. You may want to craft offers just for your best customers or spend less on those who aren’t.

2. Better decisions with your marketing dollars.

LCV allows you to accurately assess the success of your marketing campaigns. That direct mail campaign you thought only had a mediocre return may actually have a massive ROI when you look at customers’ purchases over time. Or maybe it didn’t generate huge sales initially but captured the right types of customers that ultimately paid off big.

3. Better targeted offerings.

At first, that new customer might have bought something for a friend or purchased on a whim. But you get a sense of who they really are and what they like when you watch their purchases month after month, year after year. This knowledge allows you to cultivate that relationship and deepen your profitability.

Want to learn more? Let us help you identify your best customers and how to track their LCV.

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