Use Your Existing Clients to Align Your Strategic Planning Correctly
It’s exhausting as well as expensive to lure in new customers. The world of online marketing and strategic planning may make it look easy, but getting and retaining new customers can be burdensome for resources. While large companies can afford to devote teams and unlimited money to this purpose, small- and mid-sized Plumbing and HVAC Companies cannot afford this luxury. These Companies’ must, therefore, understand the value of current clients and the lessons they can draw from existing customers to better align their strategic planning.
This article explains the very basics of the concept of Customer Lifetime Value and sheds light on how an understanding of this concept can play a pivotal role in achieving Plumbing and HVAC business targets.
What Are Your Clients Worth to You?
The Customer Lifetime Value or CLV of a client is a metric that allows Plumbing and HVAC businesses to analyze the net profit a company makes from a customer during their entire journey with a brand. CLV is an analysis of the monetary worth of a client to any business. This metric also factors in the value of maintaining the relationship with the client.
The question is: why is CLV important to businesses? How does it help Plumbing and HVAC businesses with their strategic planning?
CLV analysis allows businesses to understand the kind of clients they have and the net monetary worth of each client. This analysis further allows Plumbing and HVAC businesses to accurately calibrate how much financial investment can be made on each prospective client to convert them into a paying client while still being on the profitable side. Calculating Customer Lifetime Value also allows companies to understand the kind of customers they want to invest in.
Let’s Discuss in Detail
Let’s go with the hypothesis that you have an existing client who we call Client A. Client A spent $500 during their first transaction with your Plumbing and HVAC business and another $500 six months later. Thus, during the span of an entire year, Client A gave you business with $1000. In simpler terms, Client A’s value is $1000 to your business in their first year with your brand. Let’s now move with the assumption that Client A stayed with your brand for another five years and did transactions worth $500, twice each year. This spending brings their total spend to $6000 in six years.
Since CLV also factors in the cost of maintaining relations with clients, the total money spent by a client — in this case $6000 — can be counted as profit. Assuming you’re Plumbing and HVAC Companies makes a gain of 30% on each transaction, the net profit contributed by Client A to your Companies stands at $1800. This value also denotes the average net profit made from a client over six years. If Client A also gets you Companies referrals or can pull in a new client for you, their lifetime value will increase further as these are clients won without spending any marketing money.
This understanding of the average net profit contributed by an average client allows businesses to calculate the amount of money that should go into marketing.
Here’s How CLV Calculation Can Help Your Plumbing and Heating & Air Companies
The average lifetime value of a client is an important metric as it allows Plumbing and HVAC Companies to find answers to relevant questions, such as, what is the comfortable marketing budget that can be allocated for customer acquisition to still be profitable? How much can you’re Plumbing and HVAC Companies spend on retaining existing customers? And, who are your most valuable customers, and what can you do to incite loyalty and trust in them?
The Final Word
If you are serious about seeing your Plumbing and HVAC business reach its target goal, give more value to understanding the fundamentals of the metric called Lifetime Value and also developing an understanding of how you can use a CLV graph or CLV calculations to take steps to promote referrals through existing clients and making more profits by encouraging first-time clients to become repeat clients.
Are You Ready to Learn More?
If you want to learn more about Customer Lifetime Value and how you can use this metric to promote and grow your Plumbing and HVAC business, please reach out to our team. At BlactStorm, we are devoted to helping local businesses reach their target goals. Our team consists of skilled and experienced digital marketers who can help you increase sales within no time.