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January 8, 2007 | Customer Relationship Management (CRM), eCommerce | WineDirect Admin

REThink: Your Customer Lifetime Value

We know that most of you agree that your company should be customer-focused. Have you analyzed your database to measure your customer-focused activities? Can you answer the questions you need to know:

  • How much is a Direct-Sale customer worth?
  • How much should I invest in customer acquisition?
  • What is the lifetime value of my customer?

The ‘Customer-Worth’ Equation
The “lifetime value” (or LTV) of a customer can be used as a marketing metric. This metric can help your winery understand how much a customer is worth in dollar terms, and therefore how much you should be willing to spend to acquire new customers and/or how much to spend on keeping existing customers.

The LTV of a customer is determined by subtracting the amount of money spent to acquire the customer from the total dollar amount that customer will spend at your business throughout the course of their spending lifetime.


 

Value
After measuring customer value, the next step is to manage customer value. Wineries with experience in e-commerce find ways to maximize sales and minimize expense by evaluating purchase trend data and finding new and interesting ways to segment their customers. With the increasing availability of customer-based information, as well as sophisticated Customer Relationship Management (CRM) software and analytics tools, wineries can rank their customers by long-term profitability. In today’s world, segmentation and one-to-one marketing are no longer based on demographics or customer preferences alone, but are paired with an assessment of customer profitability. Your customers, through their actions, can tell you which route is the most profitable to take.

New customer acquisition vs. maintaining current customers:
Because growth is critical for most wineries, consistent gains in customers, market share, and revenue are typically the yardsticks for success. But, it doesn’t make sense to spend more than the ‘customer-value’ to acquire a customer. (This is where we help you to rethink your methods of acquisition). The focus should be on gaining more customers, but on acquiring the right customers—those with the greatest LTV—to focus your energy on profitable growth. This includes maintaining the relationship you already have with your existing loyal customer base. Why spend the money to acquire the right customer if you don’t put the time and effort into the retention of that relationship. So, the fine line between when to keep a customer and when to cut them lose, broadens a bit with intuitive customer data. Use it to your advantage, and collect and analyze that information for your maximum benefit and maximum profit!

Remember, direct is the best way to Communicate with, Acquire, and Retain your customers.


 

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