Understanding customer lifetime value (CLV)
According to Qualtrics: “CLV is a measurement of how valuable a customer is to your company with an unlimited time span as opposed to just the first purchase. This metric helps you understand a reasonable cost per acquisition.”
Consider Bob, the owner of Reliable Plumbing. Bob’s marketing firm maintains his website and plans spending for radio ads as well as online advertising.
Most new customers find Bob using a Google search for a plumber in their area. Once a new customer finds Bob, most will ask friends and family if they’ve used Bob’s services.
Reliable Plumbing responds quickly and does quality work. 70% of Bob’s new customers become repeat customers, and many refer Bob to other people.
Over 20 years, a homeowner may need a plumber once a year or so. That translates into 20 jobs, and possibly referrals to other homeowners who also need work for years.
All due to one person finding Bob, based on his marketing efforts years in the past. It’s a huge return on Bob’s marketing spending.
So, just how much money are you spending to find a customer?