👋 Hi there!

Welcome to The Marketing Drop-  your go to spot for small businesses trying to navigate all things digital marketing. I’m Taylor Walker- a digital marketing expert with an eye for best practices and the know how to strategically grow small businesses through online channels.

The main goal here is to discuss some big and small ways to guide you, a business owner, in the continuously changing world of digital marketing. Whether that be PPC, SEO, content creation, trends, budgeting, or benchmarks theres a lot of different opinions and I’m hoping to provide tips and tricks to guide you through all those different aspects!

So- without further ado- my very first tip for you:

Find your Customer Lifetime Value (or CLV)!

This KPI (key performance indicator) is a must that will help you reverse engineer how much you, the business owner, can really afford to be spending on digital marketing efforts. There are a lot of in depth ways to find the precise CLV for your business, but let’s just get a ballpark idea as a starting point… baby steps!

Here’s you CLV “equation”:

(Annual revenue per customer * Customer relationship in years) – Customer acquisition cost = CLV

Now let’s use it.

Say your a traffic attorney and your law office has 10 clients. You, the attorney, generate on average $3,000 per client and they  remain a client for an average of 5 years. You also know that you had spent $10,000 on customer acquisition in the past year to obtain these 10 clients (AKA marketing!), so you know your customer acquisition cost for each client is $1,000.

($3,000 * 5) – $1,000 = $14,000 CLV

Bingo- there you go! You now know that each client is worth on average $14,000 in revenue.

Here is CLV Calculator from TextMagic if you want to try a more in depth version of this equation.

From there you can determine how much wiggle room you have with budgets for additional marketing efforts in an attempt to bring in new clients (Propeller, 2017).

Another important piece of the puzzle to remember when calculating your CLV: not every customer is actually that valuable! Chances are if you dug through your sales data you likely spotted more than a few customers that dropped off after one small purchase.

That’s okay- those probably aren’t your target customer and they are something to take note of in you digital marketing efforts.

Then, on the other hand, you might have had a few customers that spend 2-3x the average amount or they may be a customer for an even longer amount of time than normal! The longer you keep a customer the more valuable they are to you as a whole since you do not have to spend any additional acquisition dollars on them!

Finding this data is the equivalent of a flashing Las Vegas street sign with  arrows pointing ‘HERE!’ Don’t pass up on that opportunity to take note and invest more into that specific type of customer since they are increasing your CLV!

So, for example, if men who are 65+ years old from a town 20 miles away seem to be low value again and again for your business – steer clear of them in your advertising since they are actively decreasing your CLV!

And if clients being referred to your business from a 3rd party review site end up being high value, long term clients, invest more into that third party site!

See… easy as can be!

 

 

References

Propeller. (2017, May 1). How to Calculate Customer Lifetime Value (CLV) and What It Reveals About the Health of Your Business. Propeller CRM Blog. Retrieved January 16, 2022, from https://www.propellercrm.com/blog/customer-lifetime-value-clv