Customer Lifetime Value Insights meetups

How to Measure Customer Lifetime ROI

The busiest time of year is approaching and you’re running ads to increase acquisitions and revenue…

Let’s say you acquire two new customers at an acquisition cost of $20 each. Luke spends $50 & Jason just $25. Luke, therefore, represents a better ROI, right? Well, initially yes, but perhaps we’re thinking too short term as Jason returns at a later date and spends another $100.

Jason Hardie, Luke Fabish and Suraj Pabari talk about measuring customer lifetime value
Jason Hardie, Luke Fabish and Suraj Pabari talk about measuring customer lifetime value

Instead of focussing on short-term ROI, businesses should consider a customer’s lifetime value. Businesses need both Lukes & Jasons but by focusing on acquiring high-value customers revenues will increase, your business will grow and all shall be donning ear to ear grins.

If lifetime value does not exceed cost of acquisition, however… you get the picture.

So how do businesses identify, target and acquire high value customers while inspiring long-term loyalty? Well, we provide a tailored experience using RFM segmentation: Frequency, Recency & Monetary.

Imagine you’re the proprietor of a coffee shop (the kind that sells drinks prefixed with too many adjectives) & want to introduce a 50% discount voucher. Ok, great. Offering a discount to customers with a low frequency may be a great way of enticing them through the door.

Watch the full stream here now.

Now consider a customer that religiously purchases their dirty, skinny chai latte each day without fail. Their frequency is already high so a 50% discount is probably the wrong approach. Instead, you could give them a free hamper on their birthday; you already know what they like.

In DV STREAM: LIfetime ROI, Suraj Pabari discusses how you can develop a strategy to retain high-value customers and increase loyalty with low-value customers.