As the market for office products and business equipment starts to slowly contract, there has never been a more opportune time for independent resellers to understand the importance of customer lifetime value (LTV) and the cost of new customer acquisition (CAC).
Ultimately, there's only one way to survive in a shrinking market and that's to increase market share. Fortunately, in the office products and business equipment vertical, despite the mature market, it's still a very big market with over $200 billion in annual retail sales in the United States market alone. In other words, there are still plenty of opportunities for independent resellers to increase market share.
Increasing market share requires successful resellers to take business away from someone else, business an incumbent is trying to hold on to. So, to succeed, office products resellers must be at the top of their game with both their value proposition and their customer service.
There's no room for poor retention rates or weak customer acquisition strategies - both are incompatible with increasing market share.
Lifetime value is the estimated revenue and margin a customer will generate during the entire span of its relationship with its supplier. It takes into account not just the initial purchase, but also how much is likely to be spent in the future on the resellers products and services.
In understanding how much sales revenue and margin is likely to be generated by a customer over its lifetime, it becomes possible to determine the optimum way to spend a marketing budget, a budget that should be focused on developing customers likely to have the highest lifetime values.
Check out our infographic below that explains lifetime values and the cost of customer acquisition. Then head over to our interactive calculator to experiment with your numbers and learn what your current LTV and CAC is.
How to boost LTV
Segmenting your customers according to their persona and how long they've been a customer helps determine where sales efforts and the marketing budget should be focused for the purposes of acquiring more "ideal" customers. While "ideal" customers may cost more to acquire, they should be more beneficial in the longer term with higher lifetime values and higher retention (lower churn) rates.
Delighting your customers with your products and services, your overall value proposition, and your customer service will combine to keep customer retention rates high while simultaneously helping serve up opportunities for developing up-sell and cross-sell opportunities with your best customers. Each of these elements then combine to create a virtuous cycle of improved LTV and, ultimately, a pathway for increasing market share.
As an office products & equipment reseller, are you still operating in the analog world or are you transitioning to digital with the use of sophisticated digital marketing tactics? You can't survive unless you do, so please check out our SlideShare "executive" summary to help you determine where you are in the process!
To improve the future for office supplies dealerships, their websites must become the foundation for digital transformation. Why not check out our free, no obligation, offer for a comprehensive evaluation of your site? Just click the button below.