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WTH is CLV? | Admit mistakes to sound persuasive | Lifetime value AI
Deep Kakkad
June 18, 2024
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Table of Contents
Curated Careers
Trends and Tidbits:
WTH is CLV?
Admit mistakes to sound more persuasive
AI Arena:
CLV Optimizer ChatGPT
Interesting reads for the week
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💎 Trendy Tidbits 💎
➡️ WTH is Customer Lifetime Value (CLV)?
Imagine you’re a coffee shop owner (what a fun business to have 🤤).
…and you’ve got two regular customers: Deep and Deepak.
Deep stops by every morning for his quick $2 coffee. Deepak comes twice a week, but he splurges on a $5 latte and often buys a $3 pastry to go with it.
Now, who do you think is more valuable to your business over the long haul?
That''s where Customer Lifetime Value (CLV) comes into play.
CLV is a metric that estimates the total revenue a business can expect from a single customer throughout their relationship. The longer a customer continues to purchase from a business → the greater their lifetime value becomes.
Why does it matter?
One, because, not every customer is equal 🤷♂️
I know I know… we don’t like to think that way and we should treat everyone equally and so on. But, it’s a fact we need to accept — we can’t equally distribute our resources among all customers the same way.
It’s like going on 10 dates and proposing all of them.
No buddy, not everyone deserves a proposal 😏
So - knowing the CLV helps businesses develop strategies to acquire new customers and retain existing ones economically and effectively.
✅ Let’s learn through an example:
A typical gym membership might cost $30 per month.
If a customer remains subscribed for an average of 3 years…
what would their CLV be?
Do give it a try before you move forward to read the answer.
30 (monthly fee) x 12 (months in a year) x 3 (years) = $1080.
Do you now see why gyms often offer discounted periods or free trials?
They know that:
once a customer signs up…
they are likely to stick around and generate significant revenue over time.
Amazon has utilized CLV to shape its Amazon Prime service. They noticed that people who are Prime members tend to spend a lot more money on Amazon compared to those who aren't Prime members.
Seeing this, Amazon realizes the value of Prime membership not just as a service, but as a way to increase the ‘spend of the customers’.
So, what does Amazon do? They decide to pack Prime membership with attractive benefits — like free shipping, exclusive movies, TV shows, and more.
These perks make the Prime membership highly desirable encouraging more customers to sign up (and pay for it) but not only that - once they are members — they buy more often to benefit from features like free shipping.
You should also know that…
The calculation (& implications) of CLV can vary WILDLY between industries.
For a luxury car brand: a high CLV might be due to a few (or fewer) big purchases over many years. For a coffee shop, it might be about many small purchases over a shorter period.
Talking of coffee shops…
💡 Trivia question:
What would you assume Starbucks’ CLV to be?
They sell coffees worth a few bucks. You know that.
Think.
Thinking?
Thought?
It is an astonishing $14k per customer. Yes, 14 thousand USD.
What makes this possible for Starbucks?
High customer satisfaction
Nice and successful loyalty program.
💡 Another question (for you to answer) —
For Netflix…
The customer lifespan OR average subscription length is 25 months.
The CLV is $291.25.
What is their average monthly revenue per user? 🤔
This one is for you to answer. I will wait for your response.
But the conclusion is…
By measuring and maximizing CLV, you can not only improve your bottom line but also enhance customer satisfaction by more effectively meeting their needs and expectations.
Amazing, isn’t it? The best business strategy is about playing the long game — investing in relationships that build over time, because you earn over time.
In other thoughts…
Admit mistakes to sound more persuasive — Source Ariyh
As part of a series of 4 experiments, and an analysis of 5,727 reviews on Sephora’s website, researchers found that:
People rated Sephora reviews as more helpful if they mentioned a previous mistake using phrases like “my bad”, “my fault” and “mistook”.
When people read a product review by a reviewer who admitted a mistake (vs didn’t):
A pair of headphones was chosen 34% more often
A speaker was chosen 12% more often
A florist was chosen 47.3% more often
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🤖 AI Arena 🤖
CLV Optrimizer GPT
The prompt will help you optimize your CLV by learning about your business.
Act like a business optimization expert specializing in maximizing Lifetime Value (LTV) for companies across various industries. You have 20 years of experience working with businesses of all sizes, from startups to large enterprises. Your expertise lies in providing personalized strategies tailored to the unique needs and characteristics of each business.
Objective: Provide detailed and personalized advice on optimizing the LTV of my business. To do this effectively, you need to learn more about the specific aspects of my business. Follow the step-by-step structure below to gather the necessary information and provide actionable recommendations.
Step 1: Understand the Business
Ask detailed questions to gain a comprehensive understanding of my business, including:
- The industry and market segment
- Business model (e.g., B2B, B2C, subscription-based, one-time purchase, etc.)
- Products or services offered
- Target customer demographics and psychographics
- Current customer acquisition channels
- Average purchase value and purchase frequency
- Customer retention strategies currently in place
- Key performance indicators (KPIs) used to measure success
- Competitive landscape
Step 2: Identify Opportunities for Improvement
Based on the information gathered, analyze the business's strengths, weaknesses, opportunities, and threats (SWOT analysis). Identify specific areas where improvements can be made to increase LTV. Focus on aspects such as:
- Enhancing customer experience
- Increasing customer engagement and loyalty
- Optimizing pricing strategies
- Improving customer segmentation and targeting
- Expanding product or service offerings
- Implementing effective upselling and cross-selling techniques
- Leveraging data analytics for better decision-making
Step 3: Provide Personalized Recommendations
Offer detailed, actionable recommendations tailored to the business's unique characteristics and needs. Each recommendation should include:
- A clear explanation of the proposed strategy or tactic
- The expected impact on LTV
- Step-by-step instructions on how to implement the recommendation
- Potential challenges and how to overcome them
- Examples of businesses that have successfully implemented similar strategies
Step 4: Develop an Action Plan
Create a comprehensive action plan that outlines the steps the business should take to implement the recommendations. This plan should include:
- Prioritized list of actions with timelines
- Required resources (e.g., tools, personnel, budget)
- Milestones and measurable goals
- Monitoring and evaluation methods to track progress and adjust strategies as needed
Step 5: Offer Ongoing Support
Suggest ways the business can seek ongoing support and advice, such as:
- Regular performance reviews and strategy adjustments
- Access to additional resources (e.g., industry reports, case studies, best practices)
- Recommendations for tools and software to aid in implementation
- Options for consulting or coaching services
Take a deep breath and work on this problem step-by-step.
🧠Interesting reads🧠
🔗 AI for SEO: How to Rank in 2024 and Beyond → Link
🔗 Beyond Generation: How to Build SEO Strategy with AI → Link
🔗 How AI is Transforming Quarterly Business Reviews → Link
🔗 Craft Brilliance With These AI Content Marketing Strategies → Link
🔗 How to Create Daily Content at Each Funnel Phase → Link
Thanks,
Deep Kakkad, your marketer friend.
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