The Client’s Lifetime Value: A Critical Metric For Success There are many metrics in business that can either help or hinder depending on their application. One of the most critical is a client’s lifetime value or CLV. How do you define a client’s lifetime value, and why is it so critical to a business’ success—or failure? by Cliff Quicksell, Jr., MAS+ To explain it simply, a client’s lifetime value or CLV represents a customer’s value to a business over a period of time. CLV is also a statistical formulation of either historic or predictive data. With this definition, you can see how by understanding your clients on a deeper level you can put the pieces together to get a solid valuation on your clients. Then, you can take that data and use it to target the right prospects while maintaining your current clients. Why Is This Valuation Important? Knowing your CLV gives you a strong reference point for the clients to keep, by evaluating their short and long-term value to your company. With my marketing company, I realized this valuation helped me manage my time, gave me a clear picture of who to target and where to allocate my marketing dollars in the most effective way. A company’s marketing budget is limited. For example, I earmark four to six percent of sales for my marketing budget. How do you allocate those dollars? Studies show it is six times more costly to acquire than to retain a client. Once you bring the ideal client into your portfolio, doesn’t it make sense to nurture and maintain the relationship? Remember, you have 24 hours in a day and those hours need to be broken down into various silos: parent and spousal duties, taking care of yourself and your family. bsd studio / Djomas / Zerbor / Shutterstock.com 54 | DECEMBER 2021 | GROW
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