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How much is a Customer worth?

This is usually a topic that dwells around Customer Lifetime Value (LTV). For Retail Business, you get tons of customers walking in and out every single day. Seriously, how do you measure it and is it really important?


Firstly what is Customer Lifetime Value?

Customer Lifetime Value is the total revenue a business can reasonably expect from a single customer. For Retail businesses, this will be the total spending you can expect from a customer over a period of time. Usually the period of time you can reasonably expect them to stay loyal to you.


That said, for most undifferentiated small businesses, knowing your LTV doesn’t really make much of an impact to your business. Because most of the time, you will be too busy serving customers to take any actions to scale your business.


But for a marketer, the last thing you want is to be spending $50 to acquire a customer that’s only worth $10 to you. So yes, LTV is very important when you’re marketing to acquire new customers. You don’t want to be spending too much such that you’re making a loss or take too long to recoup your losses.


Knowing is just the first step. By knowing your customer LTV, you can now evaluate and find ways to increase your customer LTV.

So how do you calculate your Customer Lifetime Value?

Customer LTV  =  Ave. Spending  X  Ave. Frequency  X  Ave. Loyalty

  • Ave. Spending – Calculate the average spending per customer per transaction.
  • Ave. Frequency – Calculate the average number of repeat purchases from customers in a year.
  • Ave. Loyalty – Calculate your average number of years a customer stick with you.

So how can you increase your Customer Lifetime Value?

1. Increase Average Spending

Are there any products & services customers want that you can provide?

Take a step back to look into what your customers want or need that you can provide too at not much cost. These are valuable opportunities up sell or cross sell these products & services to customers.


Of course we are not asking you to hard sell, but rather see what’s lacking so you can provide more value to your customers with the extra products & services.


2. Increase Average Frequency

Are there any occasions or event you can tag on to get customers visit more often?

Mother’s day, Father’s day, Black Friday, etc are some occasions you can consider running a promotion to activate customers. Find meaningful occasions that resonates with your customers to execute your promotions.


Never run ad-hoc promotions every other week without any reason to try to boost sales. That will only make you seem desperate and do more harm than good to your business.


3. Increase Average Lifespan

Is there anything you can do to keep customers happy and satisfied?

Constantly get feedback from your customers to improve your products and services over time. Communication is crucial, you have to keep in touch with all your customers in a meaningful way so they don’t forget and leave you for a competitor.


The last thing you want is to lose customers just because you’re too busy with your daily operations. If you’re really too busy, getting a Loyalty System can help you passively stay in touch with all your customers. This way you can have a peace of mind knowing that you’re not leaving any customers out of the loop.

To Conclude

If you’re going to invest in marketing or looking to scale or improve your business, your customer LTV is very important to help you make the right decisions.

Customer Lifetime Value is the very reason why start ups like Grab, Mobike, Lazada are willing to burn millions of dollars to acquire customers. Because at the end game, they know the money spent can be made back very quickly once they dominate the market.

SoVou is an affordable Cloud Loyalty System that uses SMS to engage your customers and encourages them to share your promotions on WhatsApp, Facebook, Twitter & Email.

Our Loyalty System’s is specially designed for Small Brick & Mortar (Offline) Retail Businesses that requires customers to come down to buy or use their services. We have stripped off the complex features to ensure that you and your customers have pleasant experience with your Loyalty Program.


Feel free to contact me at find out more about our Loyalty System!


Everything expressed in this article is my personal opinion and might not be applicable for all businesses. Please share with us your ideas and thoughts too so we can grow & learn together!


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