Easiest Way to Increase Customer Lifetime Value

/Easiest Way to Increase Customer Lifetime Value

Almost immediately after I presented the “5 Steps to Profit With Google AdWords” yesterday afternoon, I met with a client to determine how he can start profitably advertising his product. He had already tested AdWords earlier this year and just couldn’t see how it would be possible to turn the campaign from a loser to a winner.

So that’s why we were sitting in the conference room together.  And by the end of our 1-hour meeting, I could see the excitement return to my client’s face as he realized the new campaign I had badly hand drawn on scrap paper could actually work.  It’s not a slam dunk, but the numbers do make sense.

There is however, one nagging question to answer, which is a question every business needs to address if they are serious about advertising.

How can you increase the lifetime value of your customer?

Ultimately, how you answer that question determines how successful you will be with advertising.  If your customer lifetime value (CLV) is too low, then you’ll never be able to profitably advertise because competitors with higher CLVs drive up the advertising costs.  If your CLV is higher than your competitors, then you can easily dominate your market by buying up all the ad space.

There are several options to increase CLV:

  1. Increase the initial transaction value by raising your prices and introducing additional products or services (i.e. up-sells and cross-sells)
  2. Improve customer retention so each new customer continues to buy from you month after month
  3. Increase customer referrals so that one new customer is effectively multiple customers


All of the above work and should be tirelessly improved in every business.  Note that #1 is typically where businesses focus their time and energy. We naturally want to generate new business, and overlook all the little things we can do to keep existing customers.  But if you run the numbers, improvements in #2 and #3 will often have a huge impact on your CLV.


Improve CLV By Increasing Customer Retention & Referrals

According to a study by direct response marketing expert, Dan Kennedy, there are 6 main reasons why customers stop doing business with you:

  1. 1% die
  2. 3% move away
  3. 5% follow a friend or relative’s advice and switch to their recommended supplier
  4. 9% switch due to a better price or better product
  5. 14% switch due to product or service dissatisfaction.
  6. 68% …

Based on the above stats, can you guess #6, the most popular reason your customers leave you? It’s not price… And it’s not even dissatisfaction, which are are the two I would immediately think are top reasons.

Nope, it’s much more basic than that.  Remember, we’re talking about customers so they already know, like, and trust you.  That’s why they became customers in the first place.   They want to work with you and don’t want to go through the hassle of finding someone else.

But what happens when you get that next customer?  And then another one after that?  Do you still give the same time and attention to that first customer you wooed last month?  Probably not.

And that’s the answer right there: 68% of customers stop doing business with you because they no longer feel appreciated.  You should be happy to hear to this because the easiest way to improve your retention and referrals is as simple as showing more appreciation.

As we approach Thanksgiving Day in the US, I urge you to take advantage of this holiday to give thanks to all of your customers, partners, and anyone else who helps keep your business afloat.  It’s probably THE easiest way to boost CLV, which as we know can be the difference between profits and losses in advertising.


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By | 2017-11-12T10:20:12+00:00 October 11th, 2013|Categories: Pay Per Click Advertising, Strategy, Tracking and Analytics|

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  1. Magnus October 13, 2013 at 7:29 am - Reply

    You are 100% correct. I lost about 70% of my key clients last year and this year due to poor communication habits and unseriousness.
    I am rebuilding the business and I will put the experience and all that I have learnt from you into positive use.
    Thank you so much.

    • Phil Frost October 13, 2013 at 8:20 am - Reply

      Hi Magnus,

      Sorry to hear you lost so many clients, but it’s great that you now have a plan to plug that hole in your bucket! Good luck!

      – Phil

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