However, it is not enough to just listen to their requests and make an estimate. It is important to create a sales strategy based on solid evidence such as CRM data and increase LTV (lifetime value: customer lifetime value). In this article, we will introduce the sales strategies required to increase LTV and how to use CRM data to increase LTV.
Many people may be familiar with "LTV", but let's take a look at what it is.
"Life Time Value" = "Customer Lifetime Value"
LTV is an abbreviation for "Life Time Value" and is a marketing term that is translated as "customer lifetime value" in Japanese. In many cases, this refers to canada telegram phone number list the total amount of money that one customer (one company) spends on a company's products and services from the beginning to the end of their transaction with the company. Sometimes, the cumulative profit amount is calculated by subtracting the cost of acquiring and retaining the customer from the total amount.
By looking at this figure, it becomes clear how much value each customer has to the company. It is also an indicator that affects marketing strategies from a long-term perspective, such as improving customer satisfaction and strengthening loyalty.
How to calculate LTV
The basic calculation method for LTV is to multiply the "average purchase price," "purchase frequency," and "continuous purchase period." There are several ways to calculate LTV, and one formula is to subtract the "new customer cost" and "customer retention cost" from the basic figures as follows.
LTV = (average purchase price x purchase frequency x continuous purchase period) - (new customer cost + customer retention cost)
LTV can also be calculated as follows. To improve accuracy, it is better to calculate the LTV of each customer, but in reality, this is difficult, so the general analysis method is to calculate the LTV of all customers.
Furthermore, using LTV, you can also calculate CPA (cost of acquisition per new customer). If you calculate the upper limit CPA, you can use it as a reference value for the cost of acquiring new customers.
Benefits of improving LTV
It is said that the cost of acquiring new customers is five times that of retaining existing customers. In a crowded red ocean market, acquiring new customers is difficult and costly, which will be a heavy burden for companies. What is needed is marketing measures that increase the value of existing customers, that is, increasing LTV. In order to continue growing a business, acquiring new customers is important, but the key is to increase LTV once a prospect becomes a customer (existing customer).
Customers with a high LTV use products and services for a longer period of time and generate continuous revenue. This reduces customer acquisition costs relatively and improves return on investment, enabling economically efficient business operations. In addition, by pursuing customer satisfaction with your products and services, you can expect to naturally acquire new customers through word of mouth and repeat customers.
While the market is growing, you can aim to expand profits by acquiring new customers, but when the market enters a mature phase, the speed of acquiring new customers will slow down. Therefore, measures to increase the total sales of each customer (increase LTV) are necessary.
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5 sales strategies to increase LTV
How to calculate LTV
From here, we will introduce specific measures necessary to increase LTV.
1: Increase the number of acquired customers
LTV is defined to be calculated for each customer, but in reality, there are cases where it is difficult to calculate individual sales and costs in this way. In such cases, calculate for all customers and calculate the average LTV per person to analyze.
When using this calculation method, if you increase the number of customers who spend a lot, the average LTV will increase (excluding costs).
2: Increase the average purchase price
If the average purchase price of one customer increases, the LTV for that customer will also increase (excluding costs). Therefore, it is necessary to make an effort to always increase the average purchase price.
3: Increase purchase frequency
Increasing the number of times the same product is purchased will also lead to an increase in LTV. If it is a product that is purchased continuously, first analyze past data in detail and determine whether it is possible to increase the purchase frequency.
4: Increase customer retention rate
This is also where sales staff can show their skills. Make an effort to improve retention rate through interactions with customers, and link these efforts to an increase in LTV.
5: Reduce customer acquisition and retention costs
For example, by introducing tools such as SFA and CRM systems, many tasks such as creating daily reports and analyzing data can be completed in a short time, aiming to reduce costs. It is important to incorporate such IT technologies to avoid wasting resources.
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Make effective use of CRM data to create an effective sales strategy
In sales activities, you often visit customers who have been doing business with you for a long time, and it is not uncommon for you to end up just taking orders. However, in a mature market, it is difficult to maintain sales with just a passive attitude. In order to implement measures to improve LTV as mentioned above, you must engage in more proactive sales activities.
To do this, you need to make effective use of CRM data and create a sales strategy that is expected to be highly effective in improving LTV. By analyzing past sales and transaction records in detail, you can improve the accuracy of your sales.
The features of CRM and the features and functions of SFA, which is often confused with CRM, are explained in detail in the following article.
Related article >> What is the difference between CRM and SFA? Explanation of which one to choose based on the differences in functions and roles
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What kind of CRM data should be used to improve LTV? So, what kind of CRM data should actually be used to improve LTV? Let's summarize it, keeping in mind what we have explained so far.
