Maximizing Customer Lifetime Value: Eight Strategies

The video emphasize that increasing the lifetime value of a customer is crucial for business growth and profitability. Customer lifetime value represents the total revenue a business can expect to generate from a single customer throughout their entire relationship with the company. The video lay out eight distinct methods for enhancing this metric:

• 1. Increase the Price: This straightforward approach involves charging more for the same product or service. The video note that beginners often underprice their offerings and can benefit from gradually increasing prices to find the optimal point where profits are maximized without significantly impacting sales volume. Hormozi recommends the "5-5-5 model," where the price is increased by 20% after every five sales until customer resistance emerges.

• 2. Decrease Costs: This strategy focuses on reducing the expenses associated with producing, delivering, and supporting the product or service. This can involve negotiating better deals with suppliers, optimizing production processes, or automating tasks to reduce labor costs. Lowering costs while maintaining the same price point leads to higher profit margins for each sale.

• 3. Get Customers to Buy More Times: This strategy encourages repeat purchases by incentivizing customers to come back for more. This can involve implementing subscription models, loyalty programs, or simply staying top-of-mind through consistent communication and marketing efforts. The goal is to turn one-time buyers into loyal, recurring customers.

• 4. Get Customers to Buy Something New or Different: This approach involves offering complementary products or services that enhance the value of the core offering. This can involve bundling products, offering add-ons, or cross-selling related items. The video use the example of a burger and fries combo or an iPhone with a protective case. This strategy increases the average transaction value and exposes customers to a wider range of your offerings.

• 5. Get Customers to Buy a Larger Quantity: This strategy focuses on increasing the volume of each purchase. This can be achieved through bulk discounts, volume-based pricing, or simply promoting larger order sizes. The video highlight this as a particularly effective strategy for beginners, as it doesn't require developing new products or services.

• 6. Increase Quality: This approach involves offering a premium version of the product or service with enhanced features, higher quality materials, or a more personalized experience. The video use examples like offering sirloin burgers instead of mystery meat, upgrading from plastic to metal phone cases, or providing priority customer support. This strategy allows for higher price points and appeals to customers seeking the best possible experience.

• 7. Decrease Quantity: This counterintuitive strategy involves offering a smaller or more basic version of the product or service at a lower price point. This can act as a gateway for customers who might not be ready to commit to the full-priced offering. While the individual transaction value is lower, this approach expands the customer base and allows you to capture sales that might otherwise be lost. The video explain that this can lead to higher overall profitability by converting "no's" into "yeses" and potentially upselling these customers to higher-priced offerings later on.

• 8. Decrease Quality: This approach involves offering a budget-friendly version of the product or service with reduced features or lower-quality materials. This strategy caters to price-sensitive customers and expands the potential market. Similar to decreasing quantity, this approach focuses on attracting a wider customer base and increasing overall profitability through volume.

The video emphasize that understanding these eight levers and how they apply to your specific business is crucial for maximizing customer lifetime value and driving sustainable growth.