The article introduces the concept of the lifetime potential funnel, shifting the focus from just customer lifetime value to potential for exponential business growth. It offers actionable tactics and holistic frameworks for businesses to maximize customer engagement and revenue.
Picture this: You’re holding a golden key in your hands, but instead of unlocking one door, it opens up a multitude of them. Imagine if your business could operate this way. What if you’re missing out on exponential growth simply because you’re looking through a limited lens?
The focus of this article is not just another sales technique. We’re diving deep into the same philosophy that propelled our company, Area Ten, to great heights. It’s called the lifetime potential funnel, and it’s an innovative take on client relationships that extends far beyond the traditional confines of Lifetime Value (LTV).
Understanding this approach could transform your business operations, streamline your growth strategy, and drive profits. Read along to learn more.
LTV is a metric that’s been crucial for defining the battleground in business strategy. You know it well: the projected revenue from a customer over their relationship with your company.
But here’s the trap: too many businesses treat LTV as a static value. Like it’s a single lap in a never-ending race. But it’s not. Your LTV isn’t set in stone; it’s clay, and you’re the sculptor. You can mold it, shape it, and—most importantly—grow it.
That’s why we talked about the concept of customer Lifetime Potential (LTP) in our e-book, From Sinking to Sailing.
Think of LTP as LTV’s bigger, bolder, more audacious sibling. While LTV is the revenue you can expect from a customer as things stand, LTP is what you could earn if you pulled all the right levers. It’s the embodiment of untapped opportunities for upselling, cross-selling, and customer referrals crystallized into a dynamic, actionable strategy.
And when you lift your LTV, you’ll be setting off a chain reaction that catapults your LTP.
Imagine not just doubling but tripling the value of a customer relationship.
We’re talking about nuclear-level impact on your bottom line.
The best way to set the stage for the lifetime potential funnel is to first understand the compounding effect.
The issue we often see is that many business leaders have a monocular vision—fixating solely on marketing, customer service, or whatever they’re good at. This is a dead-end in the labyrinth of business strategy.
And this is where the rule of 72 could change everything.
It’s often advertised as a quick financial hack: divide 72 by the compounded annual rate of return, and voila, you’ve got an approximation of how long it’ll take for an investment to double.
But limiting it as just a financial rule is like using a smartphone exclusively for phone calls. The Rule of 72 isn’t confined to the annals of finance; it’s a cornerstone principle that can extrapolate the growth of anything, whether it’s inflation, GDP, or, crucially for you, business metrics.
Imagine enriching not just one department but making fractional improvements across the board. When these enhancements are compounded, you’re not just looking at incremental progress but igniting a domino effect of explosive growth.
In other words, you’re not only optimizing one gear in the machine but oiling the entire assembly line.
Doesn’t that sound great? Now, let’s apply this approach to your business strategy.
So, you’ve made it here: the magnetic core that propels you from mediocre results to exponential growth.
This is the heart of what we do at Area Ten.
We dissect your sales funnel to its constituent parts, optimizing multiple areas instead of just one. Why? Because we’re aware that a seemingly modest improvement at each stage can—thanks to the magic of compounding—yield a growth rate far beyond expected.
You say you’re aiming for a 25% surge in your business metrics. Fantastic, we say. But why stop there?
Our formula for success is not about single, seismic shifts but about initiating changes at multiple levels of the funnel. Our approach may involve a 5% uptick in traffic, a 5% lift in engagement rates, a 5% rise in conversion rates, another 5% climb in visitor-to-lead conversion rate, and, to top it all off, a 5% increment in sales conversions.
At first glance, you may think we’re following the same road as any other agency targeting a 25% increase. But here’s where the calculus of compounding kicks in: these series of 5% improvements aren’t additive.
They’re multiplicative, leading to compounding growth. Here’s what it looks like:
Each 5% improvement can be represented as a multiplier of 1.05.
Since we are targeting 5 different stages (traffic, engagement rates, conversion rates, visitor-to-lead conversion rate, and sales conversions), we can multiply this 1.05 factor five times:
Growth = 1.05 * 1.05 * 1.05 * 1.05 * 1.05
The result of this calculation is approximately 1.2762815625, or a 27.6% increase in growth.
And there’s a hidden benefit to this multifaceted strategy. It’s not just that the growth is bigger; it’s that it’s also safer. You’re not putting all your eggs in one basket, relying solely on one aspect of your business to propel you to your targets.
Each increment is its own catalyst, contributing to a chain reaction of growth that allows us to iterate faster and deliver not just bigger but also more robust results in the same time frame.
Keeping the concept of the lifetime potential funnel in view, you can now explore a variety of areas in your business you can focus on. Bear in mind that you’re not aiming for massive leaps in any single area. Instead, you would want to make small and easy improvements that drive a larger, compounded outcome.
Let’s delve into practical examples that showcase the transformative power of understanding lifetime value and working with the lifetime potential funnel.
One of our clients in the United States, a leader in the personal care industry, faced an intriguing challenge. They had a steady customer base, but they would only shop for our clients’ trial kits.
Initial data showed that 19.6% of their customers contributed to 76.4% of their revenue. These are mostly men in their late 40s to early 50s who were more conservative and preferred to avoid salons and clinics. Clearly, a more focused approach was necessary.
We tailored communication channels specifically for this demographic. Online communities were established where users could anonymously share their progress and ask questions from the admins, which led to a 21.7% increase in user engagement within four months.
Special packages were also designed, emphasizing discretion and ease of use. We also amplified our marketing efforts for our client’s premium, higher-tier hair regrowth kits. As a result, revenue from this targeted group skyrocketed by 45.3% in just five months.
Another client of ours, a leading accounting firm headquartered in New Zealand, faced a four-year growth stalemate. Despite being a major player in the region, they were burdened with inefficiencies. To recalibrate, we initiated a data-driven approach and identified that 21.3% of their bottom clientele was consuming 79.8% of their resources.
These clients were generally smaller businesses that only sought services when their accounting had spiraled out of control, which in turn demanded disproportionate time and manpower to resolve.
We also found that their VIPs were primarily larger enterprises that maintained in-house accounting teams and thus had well-organized financial records.
Our advice was to let go of those 21.3% of customers and to allocate the budget to their high-spenders instead.
We introduced a client communication platform that allowed real-time, transparent exchange of financial data and progress updates. Our client also started to execute webinars to help their client’s in-house accountants automate their reports
Within an eight-week timeframe, this targeted approach led to a 27.2% increase in revenue from top-tier clients.
Here’s a straightforward method to pinpoint them:
There are many ways to calculate LTV, and we actually have a step-by-step guide for that.
But as we mentioned in our e-book, it’s part science and part art. It will heavily hinge on the data at your disposal and your capability to predict future customer value.
But here’s a quick method that requires minimal data, the Yearly LTV:
Yearly LTV = Total Revenue for the Year/Number of Customers during this period
Suppose you’ve accumulated $180,000 in revenue from 100 customers in 3 months.
The 3-month LTV would be:
3-month LTV = $180,000 / 100 = $1,800.
To project this to a yearly LTV, simply multiply by four (accounting for the four quarters in a year):
Yearly LTV = $1,800 x 4 = $7,200.
There are many reasons why your existing customers could be your goldmine:
A Harvard study suggests that just a 5% surge in customer retention can catapult profits from 25% up to a staggering 95%.
You just witnessed how the lifetime potential funnel approach could bring your business to new heights with less risk. Here’s the essence distilled for you:
It’s not enough to understand these concepts. Here’s how you press the gas pedal:
You’ve sifted through the goldmine of actionable insights and rock-solid strategies. Now, the ball is in your court. Your next move could either catapult your business to untold heights or leave you stagnating in the abyss of “what could have been.” Don’t be the latter.
Those who dare to pivot from lifetime value to lifetime potential don’t just evolve; they revolutionize.
If you’re intrigued by the concept of not just lifetime value but the far-reaching implications of lifetime potential, you’re not alone. We’ve delved deep into this subject matter, and we want to share our insights with you.
Contact us today to request a copy of our e-book, From Sinking to Sailing. This is the most comprehensive source of information on lifetime value analysis and optimization, which you can get just by providing some details.
Don’t settle for the status quo. If you’re looking for more than just innovative, battle-tested approaches to growth, you’re in the right place. As a cutting-edge digital marketing agency, we offer a comprehensive range of core services like SEO, Programmatic SEO, and Paid Media Management designed to deliver bigger results, faster.
Our 100% solution philosophy ensures that we go beyond merely driving traffic; we focus on maximizing the value you get from channels like SEO and paid media. Discover how we’ve helped businesses just like yours solve their growth challenges.
Reach out today and take the steps to elevate your business to the next level with us at Area Ten.