Customer Lifetime Value, which is also known as CLV, is one of the most important metrics for any business. It determines the total revenue that a customer can generate for a business throughout the lifetime. Through this metric, any business can learn more about the customers and improve the relationships that they have with customers. Let’s take a look at how you can measure Customer Lifetime Value with the CRM and how to improve it.
How to measure the Customer Lifetime Value
You will need to identify the average lifetime of a customer to measure the Customer Lifetime Value. You can do this by taking a look at historical data, such as the average duration where customers have been working with your business. When you have all the information, you can use the following formula to calculate Customer Lifetime Value.
Customer Lifetime Value = Average customer Lifespan x Number of Purchases per Year x Average Purchase Value
For example, let’s assume that you keep a customer for 5 years, where the customer purchases 4 times a year with an average value of $100. Then you can calculate the Customer Lifetime Value as follows:
Customer Lifetime Value = 5 x 4 x $100 = $2,000
According to this, the customer you acquire will be able to generate profits worth $2,000 while doing business with you.
How to improve Customer Lifetime Value with your CRM
Now you have a clear idea of what Customer Lifetime Value is all about. Let’s take a look at some tips on how you can improve Customer Lifetime Value with your CRM.
- Segment the customers
To enhance Customer Lifetime Value, you will need to segment the customers that you have. Then you will be able to change the way you interact with each customer group. With the help of your CRM, you can easily segment the customers. Some of the CRM metrics that you can use to segment customers include demographics, behavior, and the purchase history. You will then be able to create targeted marketing campaigns that appeal to the interests of each customer group.
- Improve customer retention
According to the above formula, you will realize that if you can keep the customer for long, you will be able to enhance your Customer Lifetime Value. This is where you can use the CRM. Through data available in the CRM, you will be able to get a clear understanding of customer retention. In other words, you can discover the customers who are most likely to churn. Then you can follow personalized strategies to retain those customers with your business.
- Increase customer engagement
When you keep on engaging more with the customers, you have a better chance of keeping them with your business. Your CRM can help you with it as well. This is where you can gather data out of the CRM and deliver a more personalized experience to the customers. You may run targeted campaigns through social media, email, and messaging to receive outstanding returns.
- Providing outstanding customer service
Last but not least, you can use CRM and discover customer interactions, where you can provide an exceptional customer service. When you have all customer data in a centralized location, it will be possible for you to respond to customer queries within a short period of time. This will help you with increasing overall customer loyalty and the lifetime value of the customers.
As you can see, a good CRM is quite important to enhance your Customer Lifetime Value. Therefore, make sure that you implement the best CRM for your business and experience all these benefits.
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