You're a smart person running a smart business. You know that vanity metrics like Cost-Per-Lead (CPL) can be as helpful as a chocolate teapot when it comes to driving real revenue.
But still, your marketing team keeps pushing CPL as the end-all, be-all of success. They're so obsessed with their shiny CPL numbers that they've forgotten what really matters: customer value and retention rate.
Here's why this matters:
CPL can be a lie: A low CPL might make you feel like you're killing it, but if those leads don't turn into paying customers or repeat buyers, your business is still in the red. CPL doesn't factor in how much revenue each customer generates over time, which is crucial for long-term success.
But wait, there's more!
You might be wondering:
How do I calculate customer value?
Calculating customer value is simple: take the total revenue generated by a customer over their lifetime and subtract the cost of acquiring them. This gives you an accurate picture of how much each customer is worth to your business.
Here's a formula for it:
Customer Value = Total Revenue - Cost of Customer AcquisitionWhat is a good retention rate?
A good retention rate varies depending on your industry and business model. However, a general rule of thumb is that if you can retain 80% of your customers after the first year, you're doing pretty well.
But remember, these numbers are just starting points. The key is to continually improve your customer value and retention rate over time.
How do I calculate customer value?
Calculating customer value is simple: take the total revenue generated by a customer over their lifetime and subtract the cost of acquiring them. This gives you an accurate picture of how much each customer is worth to your business.
Here's a formula for it:
Customer Value = Total Revenue - Cost of Customer Acquisition
