Pricing for lifetime customer value (LTV)

Pricing LTV

Lesson Details:
August 19, 2020

Video Transcription: In this video I want to talk about pricing vs. LTV this video is brought to you by Appy Pie’s Academy what's LT beats lifetime value of a customer because you don't want to just focus too much on the initial price you want to focus on the holistic picture which is how much is this person going to spend with you for the duration of their being a customer and the person can be a customer for years right let's say a person who loves a car they're gonna buy the same car maybe next time they need a car they're gonna buy the same brand the same brand next time the same brand next time and guess what they're gonna need to come for checkups and they're gonna need to get things fixed that they're gonna need to get accessories so this person will spend a lot more money than just the initial purchase and that's an incredibly important thing to almost always keep in mind when choosing price so if somebody buys once that's fantastic you should always appreciate that but if somebody buys that very same thing monthly guess what that's 12 times more per year that you're gonna earn from them and weekly guess what that's 52 times more that you're gonna earn from them and guess what if they buy a week daily or whatever you're just gonna earn from them that much more and guess what maybe if they remain a customer next year and next year next year that's just a tremendous amount of money that you're gonna always make more from them if you can extend their lifetime value and it's always easier to sell to an existing customer than to find a new customer.

I shouldn't say always because the business cases can be so different but most of the time that's the traditional business wisdom is that it's easier to sell to an existing customer than a new one but most intrapreneurs most first-time entrepreneurs focus on selling to new customers and finding more new customers where the goal is really to maximize the existing customers so you always want to think during your business planning and doing planning of any features any changes any new product additions the lifetime of the customer not just the initial sale so here's a little formula for best price because it's not just about the initial price it's about the initial price plus the long term so the initial price should make it easy to get the product right there's the entry into your ecosystem should be easy for example I shall books on Amazon and guess what if one person likes my book they might buy other books of mine but they wouldn't have even read the first one if they thought the price was too much okay on the other hand if I charge too little then of course a lot of people can read the book but I don't make enough from each sale so there is that balance okay and so you always want to think about long long-term extension and we're gonna cover in the upcoming videos all kinds of tricks and and legitimate strategies to maximize lifetime value but let me give you one see now that you have seen this little formula that I made for you for the best price let me expand on this best price formula here are all the things you'd really consider it should be easy to enter now meaning the initial purchase should be easy to buy okay so that person doesn't go to your competitor doesn't ignore you they can engage with you now your price should allow either upsells for example some some people have low prices but then they find people who are willing to buy and then sell them at higher higherr and higher prices as those people engage more and more and more and get more value from the business but that's not always available though so you can you can also have up cells for example of same level up cells is let's say you go to a store and you want to buy yogurt well it's not like people are gonna sell you more the same brand is not gonna sell you more expensive yogurt but they can sell you a ton more of yogurts once you finish one get another and another and another and a different flavor so there's increase of same level sales and this these both increase lifetime value and of course you want to think of the likelihood of your type of product or business what's the likelihood of the customers returning it's not always that customers return there are some businesses where customers just get something once and they're done for life but sometimes they buy things that need to be renewed or sometimes there can be a subscription.

So it's it's very different but you have to really consider what's the situation for your business there is another thing that is interesting sometimes making a sale has additional advantages that are beyond just the sale for example if you make a lot of sales on Amazon you're going to rank your product higher on Amazon in organic searches for products and then you'll by virtue of having these sales you'll and ranking higher on organic search you're gonna get more sales from the organic Amazon so at times some your price that you set should consider into it the long-term benefits of having more or less sales are there benefits to having more sales so that's that and also of course all that is - the cost that you incur because you want to keep things profitable you don't want to set a price too low because you want to stay profitable and not run yourself or you know get it not have your business send you into the poorhouse so that's a lot of the things to consider when you're choosing a price and in upcoming videos we're gonna dissect this and we're gonna get into each strategy and how to max get the most out of it.

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