Customer lifetime value is the total amount your business will earn from a customer for the duration that the individual (or organisation) remains a customer of your business.
What is the importance of lifetime value?
Why is it important that you know the lifetime value of each customer who does business with you?
Simple. Understanding the lifetime value of your customers will enable you make critical marketing investment decisions that will help you increase sales and grow your business.
Here's the truth . . . businesses that survive and grow in this economically challenged country called Nigeria are businesses that are data driven; businesses that make data driven marketing decisions.
When you focus on making data driven business decisions, you end up making smart business decisions that increase sales and profitability of your business.
You need to understand the customer lifetime value of your business to make decisions that help you grow your customer base and your business profits.
Everything I mentioned above may seem to you like some theory from a Harvard Business School professor. Or you could conclude that it is just outright exaggeration.
Therefore, to drive the point home (about the importance of understanding the customer lifetime value of your business), I will share a story with you.
Suppose you're a business owner in Nigeria and a Nigeria digital marketing specialist approaches you to encourage you to invest in digital marketing.
This Nigeria digital marketing specialist explains to you the importance of digital marketing. And you really love the discussion.
Thereafter, he gives you the signup form to kick start the digital marketing campaigns for your business with the goal of helping you get more customers for your business.
You take the Nigeria digital marketing signup form from him.
A quick look at the signup form reveals that his digital marketing services will cost your business 370,000 Naira per month.
"WOW!", you scream. "I cannot afford that!"
The discussion ends there because your focus was on the price of the digital marketing solutions NOT the value the solutions will bring to your business.
Businesses that survive long-term in the ever changing business environment in Nigeria are businesses that make business decisions (especially marketing investment decisions) based on concrete data.
Let's apply this business decision making concept to this particular situation.
Remember the situation we're discussing . . . you have been given an offer asking you to invest in digital marketing solutions designed to help you get more customers so you can increase sales and profit of your business.
You declined the offer immediately on the basis that the price of the digital marketing services was too high.
The question is: What is a better approach to handling this?
A better decision making strategy is to ask for data on the subject matter before reaching a decision.
What data do you need to make an informed decision?
You need four pieces of data:
1. The customer lifetime value (per customer) of your products (or services)
2. The expected number of customers the digital marketing campaign on social media will bring to your business per month
3. The total lifetime revenue from the total number of expected customers per month
4. The percentage of the total customer lifetime value to be invested in digital marketing
Suppose the customer lifetime value of your products (or services) is =N=207,200 per new customer acquired
Suppose also that the Nigeria digital marketing campaign will bring your business 24 new customers per month.
That is, in this case, your business will earn total lifetime revenue of =N=4,972,800.00 for the 24 new customers the Nigeria digital marketing specialist brings to your business every month.
Do you remember what the digital marketing services was going to cost per month?
Just 370,000 Naira per month, which is about 7.5% of the revenue it will generate for your business.
Now the big question: Are you willing to invest 370,000 Naira in digital marketing services to earn a lifetime revenue of 4,972,800 Naira?
Most business owners will grab this offer!
Get the point?
You need data to make smart marketing investment decisions. And understanding the customer lifetime value of your business is one of those essential data you need.
Do not be obsessed with the monthly cost of digital marketing solutions.
Instead . . . think in terms of the value it adds to your business.
Yes, Nigeria digital marketing solutions can help you get more customers, increase sales and grow your business.
Want to increase sales and grow your business?
Our Nigeria digital marketing solutions were designed to help you do just that.
Click HERE for FREE consultation with Samson Itoje, the Nigeria digital marketing specialist.
P.S: FACEBOOK is a trademark of FACEBOOK, Inc. This Nigeria digital marketing website is not part of Facebook Inc. This site is NOT endorsed by Facebook. It was created by Samson Itoje, the Nigeria digital marketing specialist, to help businesses in Nigeria succeed with marketing on Facebook (and other social media platforms).