Today I want to talk to you about something that will be very important if you want to stay on top of your competitors: Customer Lifetime Value.
Customer lifetime value tells you how well you are connecting with your audience. Of course, this is information you should definitely want to know to be successful with your business.
This is not a complicated thing to figure out; you don’t have to be a rocket scientist to understand it, and it’s something that so many physical therapists I talk to do not utilize.
Customer lifetime value is what you need to focus on when evaluating your customers. When you see it increase, you know your customers have a good impression of you, and then you can reuse that experience for customers in the future.
But first, what is customer lifetime value, and why is it the most important number in your business?
What Is Customer Lifetime Value?
Simply put, the CLV is the amount of money a person will spend with you in their lifetime.
In other words, the CLV is essentially evaluating customers.
Let’s say, for instance, a patient at your private practice comes in for a visit, and you charge $100 per visit. Most business owners would only think about that $100 per visit and think in terms of the price they charge.
However, if you think in terms of the lifetime value, you roll all of that up and say, “Oh okay, it’s $100 per session, but the patient comes back ten times, so my average annual sale is actually $1,000.”
Then, if that customer stays with you for 15 years, you have made $15,000 from them alone, which is their customer lifetime value.
That is the way you have to think. If you can get 10 customers to stay with you for 15 years, then that would get you $15,000 from each of their lifetime values, equating to $150,000 in total. The more customers you can get for a long period of time, the higher the lifetime value, and the more profit to your private practice.
This is why you need to consider the CLV, especially when creating your marketing plan.
Why Customer Lifetime Value Is Important
The customer lifetime value is not just a number, but also a way of thinking for your business model.
The patients at your physical therapy business are not just worth the amount they pay you for their visit today. If you can retain them, their value will continue to increase in the future.
That is how you need to think when going about your marketing strategies.
You need to think about customers you can get and retain for several years rather than how many patients you can attract today, which is why it is important to invest in those customers in your marketing.
You will always have to spend money on new customers, but that costs five times as much as spending to keep existing ones. That’s why it’s important to work on retaining your existing customers.
Make sure they follow you on social media, send them emails, newsletters, etc. Make sure they know they are important to you, and make them feel important.
Calculating Customer Lifetime Value
A lot of the time, you will have to invest in marketing in order to get your perfect patients. The money you spend in order to acquire a customer is called customer acquisition cost.
If you spend money on a customer, that amount is subtracted from their customer lifetime value.
It is worth it to spend more on a customer you can go on to retain because if you can retain them, the customer acquisition cost would decrease because the cost of marketing to them would be lower.
Like I said above, it costs five times as much to market to new customers as it does to marketing to existing ones.
It doesn’t cost much at all to send your existing customers emails and newsletters, make posts on social media that they will likely see, and all that good stuff.
That’s marketing that you won’t have to spend as much money on, therefore the customer acquisition cost goes down, customer lifetime value goes up, and so will your profits.
The bottom line here is: do not be afraid to invest more into marketing to a patient you will be able to retain because it will benefit you in the long term.
The more you focus on customer lifetime value, the greater the revenue you will generate for your physical therapy practice.
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