Hello, this is Matsubara, CRM Evangelist.

"We can't maintain sales unless we keep acquiring new customers."

To business owners who feel this way, let me ask you one question.

Do you know how many more years, how many more purchases, and how much money you can expect to get from your current customers?

If you don't have the answer to this question, you might be overlooking one of the most important business metrics: **LTV (Customer Lifetime Value)**.

What is LTV? — From "One-Time Transaction" to "Total Value of Relationship"

LTV stands for **Life Time Value**, which translates to "customer lifetime value" in Japanese.

This metric represents the amount of profit a single customer generates from the time they begin doing business with your company until the transaction ends.

Simple formula:

For example, the lifetime value (LTV) of a customer who continues a consulting contract with a monthly fee of 10 yen for 5 years would be as follows:

Even if you spend 30 yen in sales costs to acquire this customer, if the LTV is 300 million yen, you will get a return of 10 times your investment. Conversely, customers who only buy once and then disappear are the most inefficient customers from an LTV perspective.

However, in many small and medium-sized enterprises, LTV is merely a "vaguely known concept" and is not actually used in business decisions or sales activities. Why is that a problem? Let's start by explaining that.

Why should small and medium-sized enterprises focus on LTV now?

Reason ①: The cost of acquiring new customers continues to rise.

In many markets in recent years, increased competition has led to higher costs in acquiring new customers, and as a result, more and more companies are focusing on strengthening their relationships with existing customers.

Some studies suggest that retaining existing customers, encouraging repeat purchases, and encouraging recommendations costs about one-fifth the cost of acquiring new customers. In other words, a business that focuses solely on acquiring new customers while neglecting existing ones is the most inefficient choice.

The key to a company's growth has shifted from "how much you sell" to "how long you remain the preferred choice . "

Reason #2: The strategy of "continuing to acquire new customers" is reaching its limits due to population decline.

With Japan's overall population declining, the absolute number of customers is shrinking in many markets. Companies that have previously operated on the premise that "new customers will come if we run advertisements" are finding it difficult to continue with the same strategy.

To survive in a shrinking market, we need a shift in thinking: to contribute more deeply, for longer periods, and broader to our existing customers . This is the essence of the strategy to maximize LTV (Lifetime Value).

Reason ③ Customers with a high LTV (Lifetime Value) also generate referrals.

When you deepen your relationship with customers while being mindful of their lifetime value (LTV), another by-product emerges: referrals.

Increased customer loyalty not only leads to repeat purchases, upsells, and cross-sells, but also to acquiring new customers through word-of-mouth and referrals.

In other words, efforts to increase LTV (Lifetime Value) not only involve "retaining existing customers" but also "creating a structure that attracts new customers." Instead of separating new customer acquisition from deepening existing relationships, the key is a shift in thinking: "cherishing existing customers is the best strategy for acquiring new customers."

The four elements that make up LTV, and the improvement levers for each.

LTV = Average Customer Value × Purchase Frequency × Customer Retention Period × Profitability

There are different approaches to improvement for each of these four elements.

① Increase the average customer spending – upselling and cross-selling

We increase the unit price by providing higher value to the same customer.

Upselling: Proposing a higher-tier plan or grade of service than the one currently being used. Cross-selling: Proposing other services or products related to the current transaction.

"We may be able to offer service B to customers who are using service A"—to avoid missing this opportunity, you need a system to understand what your customers have and what they don't.

② Increasing purchase frequency – Contact design and timing management

Making appropriate contact with customers at the right time, when they are thinking "I'll order again," will increase their purchase frequency.

The key is to align with "when the customer needs it," not "when you want to sell it." To achieve this, you need to design follow-up strategies that take into account the customer's purchasing cycle, usage period, and seasonality.

③ Extend the duration of participation – preventing churn and deepening relationships.

The most direct way to maximize LTV is to maintain long-term relationships with customers. Some estimates suggest that simply reducing customer churn by 5% can improve profits by 15%.

To extend the duration of a relationship, it is essential to have a system in place that ensures "contact is made before emotions cool down," "the relationship is not reset even if the person in charge changes," and "follow-up is not interrupted."

④ Increase profitability – Reduce customer retention costs

To increase customer lifetime value (LTV), it's crucial not only to increase sales but also to reduce customer retention costs. Utilizing CRM (Customer Relationship Management) can reduce costs associated with duplicate customer data entry, transfer fees, and reacquisition due to missed follow-ups.

The essence of LTV as revealed by CRM 4.0: Not just "numbers," but a "blueprint of trust."

Now, let's delve a little deeper into how to interpret LTV.

From a CRM 4.0 (Creative CRM) perspective, LTV is not simply the sum of sales.

LTV is a blueprint for the time it takes to build trust with customers.

The greatest value of LTV lies in its ability to visualize customer relationships through numbers. Aiming to increase unit price or frequency is not simply about increasing sales, but rather about increasing the reasons why customers want to interact with you again.

In the CRM 4.0 philosophy of "treating customers as co-creation partners," LTV is not about "how much money you can make," but rather proof of "how deep a relationship you have cultivated."

Customers with a high LTV (Lifetime Value) are those who have a deep relationship with the company and have built up a strong foundation of trust.

When viewed from this perspective, LTV improvement measures become not merely a means to increase sales, but a design for deepening the quality of relationships. This is essentially consistent with CRM 4.0's goal of cultivating customers as co-creation partners.

Five practical ways to increase LTV with EMOROCO CRM Lite

So, how exactly can you increase customer lifetime value (LTV) with EMOROCO CRM Lite, which is available from just 1,500 yen per month? Here are five practical tips.

Practice 1: Establish a "LTV visualization field" for each customer.

First, let's start by making LTV "visible." Using custom fields in EMOROCO CRM Lite, add the following items to your customer record:

Filling in these fields leads to insights such as, "This customer hasn't used this service yet," or "This customer is a loyal customer we've been working with for seven years."

Practice ② Identifying upsell and cross-sell opportunities using a dashboard

Set up a dashboard that combines the "Unproposed Services" field and the "Loyalty Level" field.

Example of a view to configure:

We will review this list monthly to ensure we don't miss any opportunities to make proposals. Customers with high loyalty (long-term, frequent, and high-value customers) are especially likely to accept new proposals, making them the best opportunity to increase customer lifetime value (LTV).

Practice ③ Automate follow-up tailored to the purchasing cycle.

We set up a workflow that automatically detects "it's about time for the next proposal" based on the customer's purchasing cycle and usage period.

Examples of automated follow-up settings by industry:

As long as this workflow is running, opportunities for proposals will arise at the right time in the purchasing cycle, even if the person in charge doesn't remember.

Practice ④ Identify and prioritize cultivating "loyal customers"

The LTV (Lifetime Value) approach doesn't require treating all customers equally. Identifying "loyal customers" who have long-term, deep, and high-value relationships with you, and prioritizing investment in those relationships, is the quickest way to maximize LTV.

Filter settings to identify "loyal customers" in EMOROCO CRM Lite:

We design actions for this list, such as special thank-you messages, priority support, and early access to new services. The experience of feeling valued by the company will lead to continued use and referrals.

Practice 5: Early detection of customers at risk of churn.

The most important thing in protecting LTV (Lifetime Value) is recognizing when a relationship is about to end.

Combining this with the "Customer Temperature" field mentioned in the previous article, we will set up the following alert dashboard.

Customers who trigger this alert are those whose loss would have the greatest impact on your customer lifetime value (LTV). Your representative will review this list weekly and prioritize follow-up efforts.

How the LTV metric is changing management perspectives

Focusing on LTV (Lifetime Value) fundamentally changes your perspective on business management.

Without an LTV perspective: "How much are this month's sales?" → The pressure to keep acquiring new customers.

With an LTV perspective: "How much will this customer contribute over the next few years?" → This creates the option of investing in the relationship.

Spending time following up with existing customers will no longer be seen as "a waste of time that doesn't directly contribute to sales," but rather as "an investment that cultivates future customer lifetime value (LTV)."

Furthermore, LTV is an important metric for external investors and partners. Being able to say, "The average LTV of our existing customers is XX million yen, and the average retention period is XX years," sends a strong message that the business is healthy.

CRM 4.0 presents a "blueprint for building trust with customers over time"—EMOROCO CRM Lite is a tool that allows you to start designing that blueprint from just 1,500 yen per month.

First, try inputting your existing customer data into EMOROCO and start by visualizing "who your loyal customers are" and "who your customers are likely to grow in terms of LTV (Lifetime Value)."
EMOROCO CRM Lite Product Page

Summary

Three reasons why SMEs should be aware of LTV:

1. New customer acquisition costs are rising: Retaining existing customers can be achieved at approximately one-fifth the cost of acquiring new ones.
2. Market shrinkage due to population decline: The strategy of "continuously acquiring new customers" is reaching its limits.
3. The chain of referrals: Customers with a high lifetime value (LTV) are the best sales resources, as they also generate referrals.

Four levers for increasing LTV:

• Raise the unit price: Structurally identify opportunities for upselling and crossselling.
• Increase the frequency: Contact them at a time that aligns with their purchasing cycle.
• Extend the duration: Intervene before emotions cool down and prevent the relationship from ending.
• Lower costs: Eliminate customer retention inefficiencies with CRM.

Five practical tips for using EMOROCO CRM Lite:

1. A field for visualizing LTV for each customer will be created.
2. Identify upsell and cross-sell candidates on the dashboard.
3. Automate follow-up tailored to the purchasing cycle.
4. Identify and prioritize cultivating loyal customers.
5. Early detection of customers at risk of churn.

Related article: ["The Moment Customers Leave" - ​​Deciphering Customer Abandonment Mechanisms from Emotional Flows]

Related article: [The difference between salespeople who make customers want to contact them again and those who don't]

Related article: [Why EMOROCO CRM Lite is a winning formula for small and medium-sized businesses in the CRM 4.0 era]