Long-Term Customer Value: The Power of the Repeat Purchaser

Marketing 18 minute read 5th March 2024

When it comes to business, everyone wants longevity. That could be the longevity of business success, the longevity of products, or the longevity of loyal customers. That long-lasting relationship with customers is the meaning behind long-term customer value.

Successful businesses aim to have a collection of ultra-loyal customers; it’s the power of the repeat purchaser.

The longer your relationship with valuable customers is, the more benefits you gain. You get more purchases, great engagement, and likely word-of-mouth recommendations. Nailing the long-term value of customers is like the secret sauce.

So, what’s the secret behind the sauce? How exactly do you go about ensuring a customer’s long-term value? A customer’s long-term value is something you can calculate; it is a business statistic. However, it is also something to strive for and track improvements against quantifiable data.

In this guide, we’ll cover a crystal clear definition of LTCV. We’ll give you tips to increase the value of customers in the long term and simple steps to calculate your LTCV. For those with a marketing mindset, there’s a special section at the end for you, too.

By the end of this guide, you’ll be well-versed in everything customer value and ready to tackle your business’ clientele.

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What Is Long-Term Customer Value?

Long-term customer value is a lifetime value formula that measures how beneficial a customer relationship is. This considers actions such as purchase frequency and positive engagement with marketing efforts. However, it should also consider how the customer feels about your business, products, and service positively. For instance, monitoring customer satisfaction measures the likelihood of future engagement.

To better understand LTCV, looking at the quantifiable formula is a good idea. The formula to calculate LTCV is as follows:

Customer Lifetime Value = Customer Value x Average Customer Lifespan

Of course, this formula requires a few precalculations. Customer value can be tricky to ascertain, and we’ll give you an in-depth calculation guide later. But as a whole, it calculates the average frequency and value of engagement. It’s essentially reflecting on what you know so far to predict future engagement.

Average customer lifespan refers to the average period customers engage with your business. For some companies, this could be six months, while for others, it could be six years. It all depends on your business model and success.

The goal is obviously to keep your customers for as long as possible. LTCV is a little idealistic and, in reality, a ballpark estimate. However, it creates an excellent goalpost for customer retention and loyalty building. Consider LTCV a rough forecast of what a customer relationship could bring, not genuine predictions for individual bases.

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How To Calculate Long-Term Value of a Customer

So, let’s get practical. You’ve seen the formula, but now’s the time to officially learn how to calculate the long-term value of a customer. Working with statistics (and math in general) can be out of many people’s comfort zones. Don’t fret, though; calculating LTVC is incredibly simple, and you’ve got the formula for guidance.

These are the three simple steps to calculate a customer’s long-term value.

1. Calculate Customer Value

Calculating customer value is surprisingly easy. You choose a period to measure the value over a month, six months, or a year. Just select whichever best represents your business model.

You then calculate the benefits of the customer, including purchases, profit, and reviews or social media engagement. You subtract the “cost” of a customer, for instance, negative reviews or time spent discussing your products before customers purchase.

Benefits of a Customer - Cost of a Customer = Total Value of Customer

Complete this quick precalculation, and you have the value of the customer.

2. Calculate the Average Customer Lifespan

Next, you’ve got to calculate the average customer lifespan in your customer base. This is easy to complete if you’ve kept a customer behavior database.

You just pick a sample of customers and calculate the length between their first and final purchase. This is really easy if you run a subscription-based business model, which can show you the start and termination dates.

A good sample size is around twenty customers or more. Calculate the length of each twenty customers’ lifespan with your business, and then add them all together. You then divide this total by the number of customers, e.g., twenty. For instance:

The Sum of All Lifespans ÷ Total Number of Customers = Average Customer Lifespan

This will leave you with a single figure, which you can use as your average customer lifespan. To avoid a skewed average, make sure to eliminate any anomalous figures. These extreme highs or lows don’t fit the general pattern.

3. Multiply the Two Together

You’ve reached the final step! This straightforward stage involves multiplying the customer value by your average customer lifespan. Multiplying these two figures together will provide you with your LTCV.

Customer Value x Average Customer Lifespan = Long-Term Customer Value

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4 Ways To Increase Customer Long-Term Value

If you are thinking, well, great, but how can I improve customer long-term value, don’t worry. One of the best things about LTCV is that it acts as a benchmark to measure customer engagement and retention progress. Nobody wants to splurge on customer acquisition costs. It makes sense that you want to drive higher numbers of high-value customers long term.

In this section, it is time to get practical. These are the top four ways to increase LTCV for your business, growing long-lasting interactions with valuable customers.

1. Invest and Evaluate Current Marketing Efforts

This might sting to hear, but your marketing needs to excel if you want to improve your LTCV. Take a look at your marketing efforts. Where can you improve? Do you have the budget to outsource anything to enhance the quality of your campaigns?

Marketing is how you entice customers, but is also crucial to customer retention. If you want to keep customers, marketing is like a regular friendly conversation. You don’t make friends by ignoring them, right?

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2. Introduce a Loyalty Program

A loyalty program is another hot tip for increasing your LTCV. This is a great way to switch from one-off customers to loyal customers. It helps customers strive for rewards, making regular purchases seem more appealing. It’s mutually beneficial and fun; everyone loves to feel part of a club or community. The psychology behind loyalty is fascinating.

It doesn’t matter whether you’re a small business or a mega-chain restaurant with a loyalty program; you get results. This is one of the most effective ways to increase your LTCV.

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3. Re-Establish Your Ideal Customer

If you don’t know your ideal customer, it’s no wonder you are struggling with your LTCV. Targeted audience marketing is the most effective way to attract the right customer. And if you attract the right customers, they’ll be a better fit and return. It’s like dating. You’ve got to be fussy and know who you want to attract.

You don’t have to jump at every quick-flame trend, but you must be relevant. There are two significant elements to this: appealing to your ideal customer (a monetizable demographic) and staying relevant and desirable.

Do you remember when fish pedicures were a “thing”? Then, the information suggested it was dangerous. You need to be picky with what trends you jump on while still appealing to your ideal customer.

For instance, adding a pink drink to your menu for the Barbie movie when your demographic is 80% women. It is all about which trends you jump on and whether they suit you and your customers.

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How Can Marketers Deliver Long-Term Value to Their Customers?

The clue is in the question: marketers need to provide content of extreme value. It’s a valid question, but luckily, it’s easy to answer when you focus on informative and engagement-driven content.

As a marketer, you may wonder how to increase customer retention. How can marketers deliver long-term value to their customers? You need a solid marketing plan for value-driven content to get your customers’ attention and long-term engagement. Here are the top three ways you will achieve long-term value for customers.

1. Educate Customers on Topics of Their Interest

This is where the informative element comes in and where it pays to know your ideal customer. A brilliant way marketers can deliver long-term value is through education on topics of interest.

For a customer base who loves wine, run wine-tasting events and live Q&As with vineyard owners and sommeliers. For a group of customers passionate about animal rights, run fundraiser events and online lectures with conservation experts.

This is where you get niche and focus on your business values and ideal customer.

2. Offer Rewards Through Loyalty Programs

Everyone loves a reward. This strategy is excellent because rewards and semi-financial reimbursement offer customers value. For instance, if you run a coffee shop, you could give them a free coffee for every five purchases. Or, for a restaurant, you provide them with a glass of champagne or free dessert for every five meals.

A loyalty program is a great marketing opportunity to maintain customer satisfaction.

3. Engage in Entertaining Ways

This strategy is popular, but some businesses mistakenly still overlook it. Don’t just engage in formal ways, like through email campaigns and SMS marketing. While we know you’ve done your best with engaging copy, too much appears dreary and unhuman to recipients.

Keep your business personable and relatable through entertaining engagement. For instance, showing behind-the-scenes interactions or just popping up some reels showing staff faces on social media. A little humanity goes a long way to creating familiarity, vital for long-term customer relationships.

The final piece of value to remember is a relationship; you are selling a unique connection to your customers.

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Using Beambox To Create Customer Relationships Through WiFi

As you know now, customer relationships are the be-all and end-all for improving your LTCV. If you want your customers to be of high value, you’ve got to focus on that business-to-customer relationship. And here at Beambox, we’d love to help you rocket your business to new levels of success.

Beambox is an all-in-one WiFi marketing platform that utilizes powerful captive portal software to boost relationships between businesses and customers. A captive portal is a simple yet effective addition to your guest WiFi system. It acts as a temporary barrier, requesting details from your customers before they get full access to your network.

With Beambox, you can adjust your captive portal to request any details. This personalization feature is vital; you can collect email addresses or prompt guests to sign up for a loyalty program.

You could also request that customers follow you on Instagram or TikTok. A captive portal is an olive branch between business and customer, holding the door open for a more lasting friendship.

You can start your Beambox free trial today. There’s no better way to increase your average long-term customer value than by investing in customer relationships. And with Beambox, you can see results in as little as 24 hours.

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