LTV (Life Time Value) is the total lifetime! value obtained from a customer. It is the idea that more profits can be obtained by focusing on the! total profits obtained from a long-term business relationship rather than just! short-term profits.
The Omi merchants, who left! behind many business! proverbs, have one! philosophy that goes, “Lose to gain.” This teaches that although there may be short-term losses, by showing favor and building relationships of trust, it will be profitable! in the long run.
This teaching perfectly reflects the idea of emphasizing LTV. The Omi merchants who were active during the Edo period were already aware of the importance of LTV.
Why LTV matters
Of course, LTV is very important in modern business. In fact, we should think of it as being even more important than before. There are two main reasons for this.
The era of steady market growth is over
As you know, Japan is already in a period of population decline.
This means that simply offering good products poland whatsapp number data will not guarantee sales in the Japanese domestic market, and it is becoming increasingly difficult to acquire new customers.
Issues related to population decline and market shrinkage are often highlighted in Japan, but population decline will progress in markets around the world in the future. Even China, the world’s most populous country, will soon begin to experience a decline in population due to the effects of its one-child policy, and economically developed countries will experience a decline in birthrates, so population decline and market shrinkage are expected to continue worldwide.
So what you need to focus on is increasing the value of your existing customers. Because they are already customers, no sales costs are required, and because they have a favorable impression and trust of your company, they are more likely to purchase from you. This is a population that is easier to convert into sales than new customers.
It is more efficient to get these existing customers to become repeat customers or to have them introduce new customers, which is where LTV becomes important.
The era of mass marketing is over
When sales of products were on the rise, mass marketing, which sent information to a large number of people at once, was effective. Television what is needed to expand inbound demand in the future? commercials and newspaper ads were typical examples, and advertising was worth paying high advertising fees.
However, things are different now. Customer needs are becoming more diverse, and mass marketing using uniform information only resonates with a small proportion of people, making it less cost-effective. This is why one-to-one marketing is becoming more and more popular. It
is now common knowledge that one-to-one communication between customers and companies can be used to respond to granular needs and generate sales.
To achieve this, it is necessary to analyze customer attributes and behavior in detail and send the most appropriate information and approach to each group, so there are many dedicated tools for this purpose. This type of marketing requires getting close to each individual customer, so it is essential to think about pursuing LTV.
How to calculate LTV?
Since LTV is a metric, there is a way to calculate it. The calculation is quite simple, and is as follows:
Average purchase price of existing customers × number of purchases = LTV
All you have to do is calculate the average amount canada cell numbers a customer will purchase each time and multiply it by the number of purchases. The higher these two figures are, the higher the LTV will be, so you can see that the key is to increase the unit price per purchase and to increase the number of purchases.
How to increase LTV?
As shown in the formula above, to increase LTV, you need to increase the purchase price and frequency of purchases. Upselling and cross-selling are effective ways to increase the purchase price.