Increasing customer revenues: A key marketing goal
Many marketers focus on growing revenue and most companies will have sales or market share growth goals. In fact, there would only be a small proportion of organizations that do NOT target growth.
In the attempt to maximize customer lifetime value (CLV), increasing customer revenues will have a significant impact. Along with retention (customer lifetime period), increasing customer revenues will have the most significant impact on total CLV.
Pathways to growing per customer revenue
The obvious answer is to sell more to the same customer, known as share-of-customer – but there are actually multiple pathways to this customer revenue goals (please refer to the below model as well). The seven main customer revenue pathways are:
- Increase purchase frequency (buy more often)
- Increase purchase quantity (buy more units)
- Increase price points (with reduced price sensitivity)
- Reduce frequency of discounting tactics
- Sell higher priced products instead (e.g. business class vs economy class)
- Sell additional products (multiple products)
- Charge a fee for service (e.g. advice, repairs, customization)
Customer revenues should increase over time
The good news is that satisfied customers and even habitually loyal customers will increase their purchases over time. There is a separate article on this website as to why customer revenues will “naturally” grow. It is also worthwhile reading on the original academic literature in this regard.
CLV Ensures Revenue Growth is Profitable
A significant danger in marketing practice is to pursue growth (increased customer revenue) without the necessary consideration of bottom-line profit or a marketing ROI.
That’s where the customer lifetime value formula comes in – because it builds in both revenues and costs to objectively assess overall customer profit contribution. Without this metrics “check”, it becomes easy to fall into the trap of thinking that marketing is all about sales and market share growth – when the reality is that marketing is all about increasing profits for the brand. In other words, a marketer is a long-term profits maximizer, with customer revenue just being one of the tools available.