If there was only one marketing metric you could follow, which one would it be? I’m sure is a hard choice to make, because actually there isn’t just one metric that can give a complete picture of how a business is doing. But there are certain metrics that can be critical to marketing actions. And Customer Lifetime Value is one of them.

Customer Lifetime Value is a metric that shows the profit a customer generates for a business from all the interactions they will ever have during their commercial relationship.

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It’s a good metric to follow if you want to know how much you can invest in attracting a new customer while having a good ROI and a good profit in the long term.

Calculating CLV can help marketers make predictions in the long term, take budget decisions and can also help them discern the good customers from customers who may not be the best target for the business.

Customer Lifetime Value = (Average Order Value) x (Number of Repeat Sales) x (Average Retention Time)

Where do Customer Lifetime Value and Conversion Rate Optimization meet?

Conversion rate optimization is becoming an activity integrated in the marketing tactics on the long term. CRO can be done on a specific period of time, like a traffic optimization campaign, but it’s much more profitable when integrated with the overall business objectives.

When applied for a determined period of time, conversion rate optimization can improve the investment made for attracting visitors on that specific period of time.

When CRO is regarded as a long term strategy for optimizing online revenue, the Customer Lifetime Value will become one of the essential metrics to take into account in the optimization strategy.

Because Customer Lifetime Value can be measured by segments of customers, it can help CRO specialists figure out what segments are more important. According to these findings they can better focus their optimization efforts. For example, if the visitors of a website aged more than 50 and that are from Paris prove to have the highest Customer Lifetime Value, maybe CRO actions should be directed towards this type of users. Trying to engage them and turn as many of these visitors into customers can become a goal in and of itself.

The other way around is just as true. Conversion Rate Optimization can directly influence Customer Lifetime Value. Through its customers retention and reengagement tactics, CRO can actually increase the value of sales and the loyalty of customers.

So, Conversion Rate Optimization and experimenting with Customer Life Value are two techniques that go hand in hand. And if you want to start creating more profitable relations with the right target audiences, you should start deploying both of them.

 

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