Customer Lifetime Value Calculator: Put a Price on New Leads

Marketing 13 minute read 9th October 2023

Are you looking for a customer lifetime value calculator (CLA)? Then you’ve come to the right place. We’re sharing everything you need to know about the customer lifetime value calculation. It’s an important metric to know for any marketer to set the right budget and identify the best customers.

In this article, we’ll also share how you should use the information discovered from the calculations. Therefore, you can make the right strategic decisions to make more money for the business.

Finally, read to the end of the article, where we’ll share the details of the services we provide here at Beambox. It’s great if you’re interested in improving your CLA by offering guest WiFi.

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How to Calculate Lifetime Value of a Customer

Are you wondering how to calculate the lifetime value of a customer? It’s an important metric to consider when determining how much to spend on marketing. Here is the lifetime value formula that you can use:

Customer Value x Average Customer Lifespan = Customer Lifetime Value

However, to complete the equation, you will need to have reliable data. Continue reading to get a better idea of how to arrive at the Customer Value metric.

How to Calculate Customer Value

Calculating the Customer Value is simple, you need the average number of purchases and the average purchase frequency. After multiplying these two numbers, you’ll arrive at the Customer Value. Here’s the formula to make it easy for you:

Avg. Purchase Valeu x Avg. Purchase Frequency Rate = Customer Value

Understanding the customer value is important to focus your marketing efforts on the best customers. Hence, you can make higher ROI decisions by figuring out how to find more valuable customers.

You’ll also need customer value metrics to segment the customer base regarding spending habits. Segmentation is an important aspect of any marketing plan to increase targeting and provide customized experiences.

Also, there are a few challenges with calculating the customer value that you should consider:

  • You’ll need to factor in referrals and brand loyalty. These can be tricky to calculate, so you’ll need extra data.
  • Due to the wide range of customer retention rates, estimating the customer lifespan can be challenging.
  • The monetary value of each customer must be sourced from accurate and reliable data. Also, it must be seamlessly integrated into your marketing systems.

How to Calculate Average Customer Lifespan

To figure out the customer lifespan, you need the total sum of customer life spans. Divide this by the number of customers, and you’ll have the average customer lifespan (ACL):

The sum of Customer Lifespans/Number of Customers = Average Customer Lifespan

You’ll need a strong data management system to calculate this figure reliably. Also, the ACL is great for making budgeting decisions. That’s because you can predict how much marketing material you’ll need to throw at each customer. For example, you can determine the length of an email sequence with email marketing.

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How to Use The Customer Lifetime Value Calculations

Once you’ve calculated your customer lifetime value, you’ll need to know how to deploy that knowledge. In this section, we’ll share some of the top tips you should consider when arriving at the CLT.

Reduce the Customer Acquisition Cost

You may have heard that it costs more to generate new customers than to sell to existing ones. However, generating new customers is important for any business that wants to avoid leaving money on the table. Hence, you’ll need to keep your customer acquisition costs low, and here are a few tips:

  • Target audience: You’ll need to focus every marketing dollar on the target audience to increase the conversion rate. In fact, today’s audiences like it when brands provide personalized experiences. Hence, you’ll need to develop detailed customer personas before launching a marketing campaign.
  • Customer retargeting: The rule of 7 states that a customer needs to hear from you seven times before buying. That’s why customer retargeting is an important aspect of any marketing campaign. To work, you’ll need to know customer behaviors, motivations, and preferences for retargeting campaigns.
  • Affiliate Programs: Try offering affiliate programs to reduce the CAC. This allows you to leverage other audiences to attract a large number of customers potentially. Note that the quality of your affiliate marketing program determines its success. You’ll need to provide a fair share of the sale to make it worthwhile for affiliate marketers.
  • Testing and optimization: You can make the most of your existing assets through testing and optimization. It costs less money to increase a landing page’s conversion rate than to send more PPC traffic.
  • Marketing automation: It’s essential to utilize marketing automation to reduce the workload on your team. You’ll also access a predictive model that helps you understand where to spend money on marketing for the best results.

Identify Your Most Valuable Customers

Use the customer lifetime value calculator to identify the most valuable customers. If you have a limited marketing budget, you’ll want to spend most of your funds on this segment. Small businesses that are looking to grow should identify their most valuable customers early on. It can help determine the type of products to develop and sell.

However, experimenting with new target audiences is important too. Even if they are currently showing low customer value, this can change through optimization. You can increase the customer lifetime value by adding new products or improving customer service. This is a great way to reduce customer attrition.

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Look for Ways to Improve Customer Loyalty

You can increase the average lifetime of a customer by keeping them around for longer and spending more money. There are a few ways that you can do this, and here are a few ideas:

  • Loyalty programs: Create a loyalty program that rewards customers for spending money with your brand. These can be rewards like discounts, free samples, exclusive products, and more. Anything that gives customers a reason to spend money with you compared to the competition. Look at the loyalty programs of other brands in your niche to understand what you’re up against.
  • Evolve your brand: It’s important to constantly evolve your brand to provide the newest and most up-to-date products. Otherwise, your customer will notice the innovations competitors are making and move on.
  • Brand message: Customers are willing to pay more for products from brands they believe in. Likewise, they will show more brand loyalty if your message is something they can get behind emotionally. For example, if you donate a portion of the profits to cleaning up the oceans, this can improve customer loyalty.
  • Subscription-based business: Creating a subscription-based business allows you to receive regular payments from customers for years. However, you’ll need to provide a service that’s regularly updated and customers use continually.
  • Regular promotions: Some customers love returning to brands for promotions. Therefore, by running promotions on a regular basis, you can keep customers coming back for years.

Double Down on What Works

You can segment your audience and calculate the customer lifetime value to discover more information. For example, you can figure out the value of customers acquired through email marketing compared to PPC.

Let’s say that email marketing customers are more valuable. Therefore, you have data to justify spending more funds on email marketing. However, you’ll need to figure out how to segment your audience best to find the data you need.

Customer relationship management software is a good tool to segment audiences. There are multiple metrics by which audience segmentation is possible, and you should explore them all. Also, you can integrate CRM software with marketing software to automate this process.

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Customer Lifetime Value Calculator - Is the Metric Worth Using?

To conclude, calculating customer lifetime value can reveal the most valuable customers. Therefore, you can direct marketing efforts toward loyal customers that spend more money. Considering the financial implications, the effort and resources used to make these calculations are worthwhile.

However, accurate data is important to ensure that the best customer lifetime value calculator is used. Therefore, take the time to invest in good data-gathering strategies and marketing software.

Do you want to improve the customer’s lifetime value by offering better services? Then, consider using the services offered here at BeamBox. We can help you keep customers happy by offering guest WiFi. This allows you to use the best guest Wi-Fi solution to keep customers on your WiFi marketing platform. So what are you waiting for? Start your Beambox free trial today and start growing your business.

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