How can the customer lifetime value help aged care marketing?

As customer resource management (CRM) tools have evolved into essential marketing and customer support tools, so has the impact of tracking customer lifetime value (CLV).

For professionals in the marketing and sales world, CLV has grown to become a metric that can help predict how much a customer is likely to spend during their ongoing interactions with a business. Although it might seem like a tool best used for retail, the implications of the CLV in aged care are endless. 

Just think of the benefits that will follow once you are able to track and predict how a consumer will engage with your aged care services over time; budgets can be allocated more precisely while targeted marketing can be used to focus on consumers at the perfect time. However, that’s easier said than done if you have never used CLV. So let’s dig deeper into what it is, how it works and what you can achieve by using CLV.

What is the customer lifetime value (CLV)?

Customer lifetime value is a metric that predicts the total revenue a business can expect to earn from a consumer during the entire lifetime relationship. In essence, it looks at past and current consumer expenses and predicts how much you can reasonably expect to earn. From this, you can better understand consumer behaviour, the value of each consumer, and the implications of trends on your business.

How can CLV be calculated?

Calculating CLV can be tricky at times, more so in aged care where services and products aren’t purchased in the same transactional way as a cup of coffee or new clothes. Don’t be concerned, though, as you can still estimate CLV with some simple steps. Increasingly advanced CRM systems are also available to do the heavy lifting if you want to invest in a third-party service.

To calculate customer lifetime value yourself, you will need to:

• Determine the average purchase value: Divide total revenue by the number of purchases across a specific time period
• Tally average purchase frequency rate: Divide total purchases by the number of consumers across a specific time period
• Finalise customer value: Multiply average purchase value by average purchase frequency
• Track customer lifespan: Assess data from a specific time period (potentially lifetime data) to determine the average customer relationship length
• Forecast revenue: Use the data you have from the previous steps to estimate the expected revenue from an average customer (customer value multiplied by average customer lifespan)

Direct benefits for aged care

CLV is an underutilised metric in aged care, but it’s one that could become more important over time. How? The ability to track consumers from retirement through to aged care means you can better predict revenue and necessary expenses over the short and long term. But that’s not the only advantage you can expect.

Improved marketing campaigns

CLV gives you historical and predictive data that’s perfect for enhancing the efficiency of marketing campaigns. Whether it’s measuring the financial performance of each campaign or looking at what’s worked in the past, you have data to back up reports and projects.

Supported financial planning

Not only can you piece together better marketing strategies, but you can also develop more accurate financial forecasts. Detailed financial planning provides some reassurances in a challenging aged care market; and in saying that, it is important to remember that CLV is predictive and may not always be 100% accurate.

Better consumer support

By tracking your consumers through purchases and service history you have the ability to better reward those who are above-average consumers. Incentives, deals and additional services are perfect for dedicated long-term consumers who are more valuable to your revenue stream.

Increased retention and brand loyalty

If you can provide a wide range of services to consumers, including in-home care and residential aged care, you have the ability to increase brand loyalty by supporting your most valuable consumers. They will continue to invest in your services as they age, leading to increased consumer retention. It’s a valuable win-win for both sides. 

Incorporating CLV into operations

If you want to incorporate customer lifetime value into your operations, it should be trackable through leading CRM tools such as Salesforce and Mailchimp. Alternatively, your internal sales or marketing team can track it with internal data or an external marketing agency could assist with the set-up.