Companies are often confused about how much money to spend on marketing. Not only is it vital that you establish an overall marketing strategy, but you will also want to understand how much money you can afford to spend on internet marketing. And before you start putting together a marketing plan, we believe it is a good idea for you to identify your Lifetime Customer Value, or LCV. The LCV is exactly what it sounds like – the amount of money that a customer is going to generate for you in their lifetime.
Finding New Customers
The goal of any marketing campaign is to find new customers, and to ensure that our current customers are aware of any progress the company is making. It is all about understanding how much money a customer would spend in the short term, whether you are retaining the customer for a year, two years or ten years, and how many times you must go back and find new customers. These figures will help you understand how much money you should be spending on marketing in each year.
For instance, companies that are selling high ticket items would not mind having to redo their push to find new customers every six months to a year. Customers may only buy one product in their lifetime from the company, but since the product costs thousands of dollars, investing in online marketing to attract those customers is worthwhile.
In contrast, if a company is selling an item that has a price of $50, but the customer is only going to buy the product one time and will not come back, it does not seem as though an expensive online marketing strategy is wise. Instead, the company may want to ensure there is a cost-effective approach to regularly seeking out new customers that could work.
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Return on Investment
When considering marketing options, such as SEO, link building and content marketing, it is vital to learn about the return on investment. For instance, how much money can you expect to earn from every dollar spent on these marketing strategies?
What is the LCV?
The Lifetime Customer Value is calculated by multiplying the average months managed by the revenue per client. The revenue per client is how much money you will make in 12 months from a client, and the average months managed refers to how long a customer will keep buying from your company.
If your company believes that it can get $300 from each customer in a year, and each customer will stay loyal to the company for an average of 36 months, then the calculation for LCV yields $300 x 36 = $10,800.
Now we know that this hypothetical company is getting roughly $10,000 in a lifetime from each customer. And the company will know much money they can spend on content marketing, link building and other marketing strategies.
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This is Jerry, freelancer, blogger and avid Moz reader. For those who want to learn more about how SEO works, and about the intricacies of link building and content marketing, visit https://seojet.net/blog/homepage-seo.