Customer Lifetime Value: Why Even Small Sales Count

man getting the credit card from the customer

man getting the credit card from the customerWhat’s better for business: small but frequent purchases from a long-time customer or big but infrequent purchases from a new customer? It’s hard to say which one is more profitable, as several factors need to be considered and it can be different for each company. What it depends on, ultimately, is the investment you put into targeting new and old customers.

Any digital marketing company in Virginia will agree that customer retention is essential for businesses, but because customers don’t purchase in the same frequency and quantity, there’s some argument to be made about the lifetime value of each customer.

How Important Are Old Customers?

When you’re a new company, and you’re still trying to build a customer base, you understand the importance of turning each visitor into leads. Each one is a potential sale waiting to happen if you know just how to address their needs and pain points. Then, once that initial purchase is made, do you move on to a new customer?

That would mean coming up with new marketing strategies to capture the interest of those who are not fans of your brand already. If it’s hard to make an initial impact in the market, it’s even harder to convince those who weren’t convinced the first time around to change their mind. What makes this easier, however, is the use of customer testimonials. This is where your initial and recurring customers come in. They have used your products first hand, and if they are satisfied enough to continue using it, there’s a good chance they will recommend your product to others.

Comparing to New Customers

A good portion of your marketing budget goes to targeting new customers. Here, you get to experiment with ads that worked in the past but needed updates or personalization, or you come up with new ads. You need to consider the age and trends. You show potential customers that you are updated with the times and that you care about current issues. You also have to show them that you can satisfy your old customers.

You don’t realize it, but customer retention becomes part of your new marketing strategy. It’s like the building blocks of your marketing strategy–without a loyal customer base, you will not be able to attract more customers. After all, if there are not enough people to support a company, is it worth giving it a chance? This adds to the lifetime value of a customer, making them more than just the sales they contribute to the company.

A Balance of Costs

woman illustrating the customer attraction-retention process

It’s essential to consider the customer lifetime value, but understand that the cost you spend to acquire and keep each customer should be reasonable as well. If you’re spending just as much as they’re bringing in, you are not gaining anything. If you are spending too much, perhaps it’s time to reconsider your marketing efforts. If you somehow get returns of 400-500% for the amount you spend on customer retention, consider reinvesting some of that into your brand’s growth.

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