What is more important for scaling a business?
Posted: Wed Jan 29, 2025 4:55 am
genwords
Contents
1 Why is customer lifetime value key?
2 LTV tells you about your acquisition costs
3 How to use LTV and CPA to your advantage
4 Conclusion
When running Pay Per Click (PPC) campaigns commercial property owners database or investing valuable cash flow into Search Engine Optimization ( SEO ) to scale a business, hopefully most people are primarily concerned with two things:
In customer lifetime value (LTV)
Cost per acquisition (CPA).
If your primary concern is rankings, impressions, or click totals, think again.
Both CPA and LTV are key performance indicators (KPIs) that are essential for successful performance.
If you don’t know your LTV or CPA, you’re flying blind as you don’t know what moves you should or can make because you have unknown costs. You’re neglecting the bigger picture.
And when it comes to positioning a company, both KPIs play a specific role.
But which is more important to focus on for profit growth?
Here is the answer and why
definitive guide to seo
Group-427320753
Why is customer lifetime value key?
When looking to position your business by attracting new customers, you have a few different options.
Can:
Start investing in more advertising (or SEO) to attract new and unique customers.
Upsell to existing customers to increase their spending.
Create more products to reach more target markets.
These are the three main, most common options for scaling a company.
At its most fundamental nature, growing a business means you're either increasing the value of existing customers or growing your total customer base, or both. But none of those three options and the strategies they require are easy, cheap, or even free.
Not even by chance.
Your time is money.
Even if you are just starting your business, without any help from outside agencies, your time is money.
Do you think email marketing is free? Think again:
Time (work)
Tools (overhead)
Content creation
Nothing is free.
And all of these different actions or tools have an acquisition cost. For example, if you look at the average cost of keywords in your industry on AdWords, this tool will tell you part of the acquisition costs.
Or, look at how many hours you will have to spend writing to create content for your SEO keywords that will drive traffic. How much will the total cost of your labor be?
Each of these acquisition factors adds dollars and cents to the cost of acquiring a single customer.
keys-to-succeed-in-the-digital-world-1024x637
Photo: pixabay
Before you invest in competitive keywords that can be costly, we recommend that you instead focus on selling to your existing customers.
Why? Because the more existing customers come back and buy again, the more money your average customer brings you.
And you don't have to worry about spending thousands on campaigns. But what good is CPA without LTV?
It just doesn't work.
In other words, what is a reasonable cost per acquisition? Is it industry-based? Are there industry benchmarks to look at? What seems reasonable?
None of that works.
Here we tell you why:
Every business is completely different. Even if they sell the same products or services:
The business models are different.
Customers are different.
The strategies are different.
Which means that no two acquisition costs and customer lifetime values are identical in nature.
And simply comparing your CPA to standards means nothing.
The plain truth is:
How can you know what to spend on acquisition if you don't know customer lifetime value?
The answer? You can't.
Customer lifetime value is key because selling to existing customers is 5x cheaper. You already have the customers, so why are you spending tons and tons of money on acquisition?
Why are you turning on new inbound campaigns and pumping out outrageous amounts of money into free content in exchange for customer data ( lead magnets) and custom designed landing pages?
Now, make a simple equation :
Count up all of your existing customers and your total annual revenue from them. Add them up and divide by the total to find your average. That number is the average amount a single customer spends in a year.
While this isn't an exact way to calculate LTV, it's an estimate to give you a general idea.
Now ask yourself:
Is it tall enough? Can it be taller?
I bet you could create an email with new ideas for your existing customers and sell them an additional $300 each month. In seconds. For just pennies on the dollar in terms of labor and tools.
With new and simple ideas, you can increase your LTV.
Here we tell you why it is important.
Contents
1 Why is customer lifetime value key?
2 LTV tells you about your acquisition costs
3 How to use LTV and CPA to your advantage
4 Conclusion
When running Pay Per Click (PPC) campaigns commercial property owners database or investing valuable cash flow into Search Engine Optimization ( SEO ) to scale a business, hopefully most people are primarily concerned with two things:
In customer lifetime value (LTV)
Cost per acquisition (CPA).
If your primary concern is rankings, impressions, or click totals, think again.
Both CPA and LTV are key performance indicators (KPIs) that are essential for successful performance.
If you don’t know your LTV or CPA, you’re flying blind as you don’t know what moves you should or can make because you have unknown costs. You’re neglecting the bigger picture.
And when it comes to positioning a company, both KPIs play a specific role.
But which is more important to focus on for profit growth?
Here is the answer and why
definitive guide to seo
Group-427320753
Why is customer lifetime value key?
When looking to position your business by attracting new customers, you have a few different options.
Can:
Start investing in more advertising (or SEO) to attract new and unique customers.
Upsell to existing customers to increase their spending.
Create more products to reach more target markets.
These are the three main, most common options for scaling a company.
At its most fundamental nature, growing a business means you're either increasing the value of existing customers or growing your total customer base, or both. But none of those three options and the strategies they require are easy, cheap, or even free.
Not even by chance.
Your time is money.
Even if you are just starting your business, without any help from outside agencies, your time is money.
Do you think email marketing is free? Think again:
Time (work)
Tools (overhead)
Content creation
Nothing is free.
And all of these different actions or tools have an acquisition cost. For example, if you look at the average cost of keywords in your industry on AdWords, this tool will tell you part of the acquisition costs.
Or, look at how many hours you will have to spend writing to create content for your SEO keywords that will drive traffic. How much will the total cost of your labor be?
Each of these acquisition factors adds dollars and cents to the cost of acquiring a single customer.
keys-to-succeed-in-the-digital-world-1024x637
Photo: pixabay
Before you invest in competitive keywords that can be costly, we recommend that you instead focus on selling to your existing customers.
Why? Because the more existing customers come back and buy again, the more money your average customer brings you.
And you don't have to worry about spending thousands on campaigns. But what good is CPA without LTV?
It just doesn't work.
In other words, what is a reasonable cost per acquisition? Is it industry-based? Are there industry benchmarks to look at? What seems reasonable?
None of that works.
Here we tell you why:
Every business is completely different. Even if they sell the same products or services:
The business models are different.
Customers are different.
The strategies are different.
Which means that no two acquisition costs and customer lifetime values are identical in nature.
And simply comparing your CPA to standards means nothing.
The plain truth is:
How can you know what to spend on acquisition if you don't know customer lifetime value?
The answer? You can't.
Customer lifetime value is key because selling to existing customers is 5x cheaper. You already have the customers, so why are you spending tons and tons of money on acquisition?
Why are you turning on new inbound campaigns and pumping out outrageous amounts of money into free content in exchange for customer data ( lead magnets) and custom designed landing pages?
Now, make a simple equation :
Count up all of your existing customers and your total annual revenue from them. Add them up and divide by the total to find your average. That number is the average amount a single customer spends in a year.
While this isn't an exact way to calculate LTV, it's an estimate to give you a general idea.
Now ask yourself:
Is it tall enough? Can it be taller?
I bet you could create an email with new ideas for your existing customers and sell them an additional $300 each month. In seconds. For just pennies on the dollar in terms of labor and tools.
With new and simple ideas, you can increase your LTV.
Here we tell you why it is important.