For many marketers it’s tempting to create KPI’s (Key Point Indicators) based solely on specific marketing campaigns, but for most businesses it’s difficult to turn these short term results into a long-term strategy.

By analysing instead the Life Time Value (LTV) of your customers rather than ROI for each campaign, you can develop a much more robust business plan and focus on the 20% of your customer base who actually generate 80% of your turnover.

Furthermore, Customer Lifetime Value (CLV) can be used to calculate the Average Order Value for specific customers or customer groups over a given period. This information helps you to make your marketing campaigns as wide as possible but without wasting effort on infrequent, low-value customers.

For example, customer X may have a CLV of £2,000 to your business, but they could have been a customer for 10 years, meaning their AOV per year is just £200.

Meanwhile, customer Y might have a CLV of £800, but if they’ve only been a customer for 2 years their AOV per year would be substantially more at £400.

So by combining your knowledge of CLV and AOV you can start to work out who are the ‘treasure chest’ customers who need to be unlocked (with things like Win Back programs) versus the more loyal customers who are actively engaged with your brand right now and suitable for upsell opportunities rather than discounts.

These ‘active’ customers can also be great ambassadors for your brand – whether they realise it or not (for years now, companies like Sky TV and Virgin media have used the viral power of ‘active’ customer referrals to generate new customers). So it’s important to make sure you treat them well and it’s important to note that this particular investment is definitely worthwhile. Newsletters giving details of members only promotions, Social Media updates on Twitter & Facebook, and even website offers for signed in users, all help to make customers feel valued and a part of your journey.

So as a business owner it’s important that instead of asking your marketing team, “What was our return on ad spend for that last campaign?”, you should instead ask, “How many high LTV customers did we create this year?”.

By making this shift to long term stability instead of short term gains, your marketing team can focus on brand development and campaigns that build over time. This will allow you to forge stronger relationships with external design agencies as they’ll see the potential for more ongoing work and will be able to reduce their project costs to compensate.

Sparkstone Creative builds relationships between people and brands.

We’re here to help you deliver the longer term marketing strategies that generate repeat customers, which is essential for any business.

And with Sparkstone CRM you’ll have a complete picture of your entire customer pipeline. Giving you the ability to analyse individual customer spending patterns or the AOV of wider groups.