Select Page

When we’re asked that question, we like to respond with a question of our own…

“What are sales leads WORTH to your business?”

This is (quite literally) the million dollar question! The cost of marketing and sales lead generation is important, but what is more important is the value of that lead once they’re converted into a customer. As a business owner, you are always looking to boost profits by finding the most cost-effective ways to gain new customers, maintain existing customer relationships and optimise your marketing efforts. So if we told you it was as easy as LTV, what would you say?

What is LTV?

Simply put, LTV is the lifetime value of a customer to your business; it’s a method used to estimate the projected revenue from a customer over your relationship. Knowing the value of repeat business helps you determine how much you should invest in customer retention and acquisition. Having this critical information allows you as a business owner to make important decisions on:

Product Development – knowing the LTV of a customer allows you to decide whether it is cost effective to make major changes to satisfy the demands of a small segment of the customer base, or not.

Marketing – knowing the LTV of a customer will help to determine whether acquiring new customers provides a sufficient return on investment if it costs more in marketing to acquire a new customer, than their LTV, it’s time to rethink your marketing strategy!

Customer Support – increasing customer satisfaction is statistically one of the best ways to retain customers and increase LTV. A recent study by the Harvard Business Review found that it’s 5 to 25 times more expensive to win over a new customer than it is to keep a current customer happy.

How is Customer Lifetime Value Calculated?

LTV [equals] Lifetime Customer Revenue


Lifetime Customer Costs

At it’s simplest, if a customer purchases £1000 worth of products or services from you over the lifetime of your relationship and the total cost of providing these products or services is £500, then the LTV = £500.

With these findings, to spend anything over £500 on marketing to gain a new customer would be a negative return on investment.

You can work out your customer lifetime value here using our very own LTV calculator.

It’s always easier to sell to loyal customers than it is to constantly throw your precious resources at lead generation (which can often lead to a high rate of customer churn), so using your customer lifetime value in your marketing strategy will:

Create cost savings

You know your customer, you know what benefits they are looking for and you can focus your resources on these, rather than trying to please everyone. Finding new customers is expensive and time-consuming, ads, newspapers, Google, social media all add up, however, if you have someone in your database, you can send them emails for free. So long as they’ve given permission, don’t risk fines to due to GDPR non-compliance!

Streamline your marketing

You already know your customer is happy with your product or service, so your next steps are refining and ensuring that you are their continuous choice, rather than them going out to the marketplace to look for alternatives.

Encourage Brand Loyalty

Remember the customer is always thinking, “what’s in it for me”, so maintain regular contact and give them something they’ll benefit from, perhaps a free e-book, tutorial videos or top tips.

Increase sales

You’ve already warmed up your customer, now you can keep them up to date with your latest promotions, along with a very persuasive call to action.

Save time

Concentrating on your target market and loyal customers will save time, as you will not need to chase those cold leads and time wasters.

Most successful companies involve LTV on nearly every business decision they make, they also tend to focus their marketing and customer service efforts on the loyal, higher value customers and higher LTV customers. This marketing is more of a rewards programme offering incentives to retain the customer such as:

  • Offering exclusive discounts, only available to LTV customers who make multiple purchases
  • A loyalty programme
  • Rewarding customers for referrals
  • Providing special customer service, such as a named account manager
  • Offering preferential credit terms

On the other hand, there are businesses in some industries (mobile phone or internet service providers, banks, insurance companies) who take the completely opposite tack. They actually exploit the loyalty of their customers, because they know that they are unlikely or unwilling to switch to an industry competitor, meanwhile customers who are willing to shop around generally then end up with the best deals!!

At Aprvd | Social Video Marketing we are a social media video focused lead generation provider. Using the power of the video on social media platforms to grab audience attention and convert their engagement into qualified sales leads for your business. Get in touch to find out more.