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How to Influence Your LTV With Quality Leads

If you have given only a passing thought to the relationship between generating quality leads and achieving high lifetime customer value (LTV), you aren’t taking it seriously enough. Bringing the most qualified prospects into your sales pipeline is the first and most important step toward high LTV.

The following is an overview of the relationship between the quality of your leads and the long-term financial implications.

Importance of High LTV

Start by considering the importance of high lifetime customer value to your business. The average company loses around 15 to 20 percent of its customer base each year. When you factor in the operational and marketing costs involved in acquiring a typical customer, it is difficult to profit if your attrition rate is high. In fact, in some highly-competitive industries, you won’t be profitable at 15 to 20 percent attrition. Reducing your rate below the norm gives you a significant financial advantage.

As a simple example of LTV importance, consider two different customers that purchase from a business at the same point. Assume a cost of acquisition of $300. If the first customer calls on your firm a couple times and makes purchases totaling $300, with a 25 percent operating profit, you generate $75 in operating profit. If the relationship ends, that customer cost you $225 to do business with him. In contrast, you are able to retain the second customer, and after three years, that customer has produced $500 in operating profit. Plus, the relationship endures, leading to more profit moving forward.

It’s important to find quality leads because they can add to the overall span of your LTV.
It is easier to build and improve customer experiences when you use data and concentrate on a niche target market.

How Generating Quality Leads Fits In

In the scenario described above, your ability to offer quality products and services that more than satisfy the customer’s needs impacts relationship longevity. However, much of the potential for success is established even before the first purchase is made.

Going on a blind date with someone to whom you are not attracted is a sure setup for a short-term relationship. Similarly, acquiring unqualified prospects with little to no need for your solutions is wasteful. You need to build the most in-depth profile on your targeted prospects that include demographic, geographic, firmographic and behavioral data. Doing so aids your ability to develop effective message strategies and to deliver them through the most impactful channels.

The Neverending Pursuit

Just as companies evolve, so do customers. You need to constantly monitor data on your promotional strategies, customers, and products. The goal is to look for opportunities to reduce wasted investment and to fine-tune communication with more prospects that match your ideal profile. Your customer database offers insights into the profiles that help your business achieve the highest profitability.

On average, a company can lose 15 to 20 percent of its consumer base each year. So carefully consider the LTV of your customers and how it affects your financial future.
Using CRM and marketing automation programs is one of the only strategies a small-business operator can rely on to compete with larger providers.

Conclusions

Understanding the relationship between generating quality leads and reaching high LTV is vital to your success. However, you still need to take the steps to get the right prospects in your pipeline. Salesgenie’s massive database of contacts with enhanced data helps you connect with your top prospects; start your free trial today!

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