Your CLV is your ‘customer lifetime value’. This is the most important metric to track in terms of making money and it’s another one you’re going to have to calculate yourself by looking at a range of other metrics from your panel.
First, look at the amount you are charging for your product and more importantly how much you make for each sale. What is your profit margin for each unit you shift?
This will be the RRP minus your ‘COGs’ (cost of goods sold). And while you’re at it, don’t forget to look at any discounts you might offer sometimes or the cost of delivery etc. From here, you can then look at your number of unique visitors and the total number of sales. Roughly divide the total profit per year by the number of visitors and you have a rough average value for each of your customers.
Customer Lifetime Value really measures the value of all your leads and visits. In other words, buying customers are worth X amount of money to you and visitors who never buy from you are worth 0. But if you take the average amount, then you can work out a value for each visitor to your site, which we call CLV.If you have 100 visitors, 1% conversion rates and a product worth $100 (with 100% profit) then each visitor is worth $1 to you, because statistically they are likely to earn you $1.
What’s more, is that you can then look at how many of those sales are repeat customers and factor this in to work out how many of your customers actually buy multiple times and are thus worth $500 in reality. This gives you a more long-term idea of how much you can earn from a visitor, except it’s worth noting that cash flow issues might rear their ugly head here.
To increase your customer lifetime value, you simply need to improve your conversion rates and your targeting. If you make your money from adverts meanwhile, then you could increase your CLV by looking at your AdSense optimization. How well placed are the adverts around your site? How relevant are the ads being shown? What if you don’t want to sell anything from your website? What if your aim is simply to build trust and gain a massive following?
Well in that case, you should still consider the CLV. This is still important because it is going to give you a budget for marketing your site and for promoting yourself. And this in turn will result in more hits.
It is up to you how you decide to define a ‘customer’ – whether that means a visitor, an email subscriber or an actual customer. And this will depend on your goals.
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