Do you know what the lifetime value of your customers is? If you haven’t heard of it, then it’s time to start learning. Knowing how to manipulate and increase this value can make all the difference between the ultimate success or failure of your business.

dollar-signAccording to a recent Marketing Metrics study, the probability of successfully selling a product to your existing customers is around 60 to 70%, while the probability of selling to a new customer is only 5% to 20%.  It is thus more likely that you’ll be successful re-marketing your products to existing customers than it is trying to gain new ones. Existing customers have already demonstrated their interest in your products or services and are already engaged with your brand. Moreover, you probably already have crucial customer data to work with, such as contact information and buyer history, that you can pair up with your product/service life cycle and industry trends.

If you know how to actualize this potential source of sales, you can uncover a very lucrative goldmine. This process begins and ends with your customer’s lifetime value, or the prediction of the net profit attributed to the entire future relationship you will have with a customer. Knowing how to calculate your customer’s lifetime value (LTV) is thus a vital measurement of your business’ health and a predictor of long term success. But, it doesn’t stop there. You also need to know how to act on this information

To see the LTV equation in action, check out this great infographic over at Kissmetrics that attempts to break down the lifetime value of a Starbucks customer and how this may affect their business decisions.

So, how can you improve the LTV within your own business? Here are three areas to consider:

1. What is the current level of customer satisfaction? In order to increase your LTV, you need to be focused on customer retention, and this means your customer satisfaction has to be strong. So, make an effort to get feedback from customers about their experiences doing business with your company. You can conduct surveys, look at user-generated customer reviews, and pay attention to who mentions your company online and in what context.

2. How many paths of communication are open? Do you create opportunities for current and future communication with your customers? Do you have their email addresses, social media profiles, or mobile phone numbers? When previous and current customers land on your website, do they see personalized content or offers? All of these channels can be used to bring customers back into the sales funnel.

3. Where can you create additional value? Look for ways to add complimentary products or services, upgrades, or any elements that add perceived value to your basic products and services. If your brand is very clearly defined, even just providing customers the opportunity to further identify with its ideals can part of the perceived value as well.

In short, the LTV of your customer is one of the fundamental elements of your business. But, unlike many assets or sales figures, this number is not static. If you go in with a focus on customer retention, keep the lines of communication open, and constantly seek to provide value that “grows” with the customer, then this amount can be maximized to the fullest and significantly help your bottom line- now and over the long term