Lifetime value is the total money you receive from an individual customer throughout their company journey. It helps you to calculate the total revenue and profit you generate from a particular customer. In contrast, the customer acquisition cost is the money you spend to acquire a new customer. It’s one of the factors that states whether your company model is viable or not. A successful business model has higher LTV and lower CAC. If your company’s LTV is lower than its CAC, it loses money every time they acquire a new customer.
Improve average annual recurring revenue:
Annual recurring revenue refers to the monetary value of a subscription-based company’s subscriber base of yearly subscriptions. To increase your arr(annual recurring revenue), you can follow specific steps:
- Raise the price: increase the cost of the product you offer or their monthly subscription rate.
- Ditch the free plan: providing free products to your customers can help you increase your brand awareness, but for generating revenue, it’s a bad idea to launch free products in the market often.
- Offer yearly pre-payment: give a discount to your customers who plans to take a yearly subscription to your product. Such customers tend to stay loyal to your product.
- Remove the unlimited offers from your product: to generate good revenue, remove the unlimited offer and limit them to a particular time.
Employ a targeted sales approach:
Plan a targeted sales strategy to know who your potential clients are. It is essential to have a system because it gives you an idea to provide a correct exposure to your business and target the interested clients that are more likely to buy your product or use your services. Knowing that not everyone is your customer is vital. According to your strategy, figure out what type of marketing will help you generate more sales. Be it inbound marketing that helps you attract leads using targeted sales funnel or outbound marketing in which you directly approach people through cold emails or calls.
Shorten the sales and onboarding cycle:
User onboarding can help your customers to know about your product and how to use them. This will help you to build a trust factor in your audience. At the end of the customer journey, they are more likely to get converted into sales. By creating an intelligent onboarding cycle, you will transform your customers from free to a paid version, shorten the sales cycle stage, reduce the churn rate, and improve customer retention. Shortening the sales and onboarding cycle is vital because customer prefers most minor steps to get converted. If they need to go through a long sales process, there is a high chance of them getting off the site. The best onboarding cycle has three stages: first, when the customer recognizes the value you offer, second, when the users get connected to the primary features provided by you, and last when your user has constant contact with your secondary features. If your product completes all three stages, there is a high chance of customers being converted to leads.
It’s vital to know that you are not marketing your product to everyone. Create a target persona of who are your actual customer and segment out accordingly. Use your sales strategy only on your targeted customers. The goal to segment out the customer is to decide how to organize your customers according to your business needs and maximize each user’s value to the business.
Finendorse helps you to calculate your accurate LTV: CAC ratio. We help our clients to plan innovative sales strategies and segment out customers to maximize the sales in their business.