Calculate customers lifetime in your travel agency

Posted on April 1 2019

A customer’s lifetime value presents the net benefit a travel agency makes fro many customer.
Customers lifetime can guide the travel agencies how much money should they spend to attract new customers and how much money should they spend to repeat a successful campaign or maintain their current loyal customers.

Data is a basic metric to define any required status. Based on travel agencies customers data and visiting frequency you can determine and calculate your customer’s lifetime.

The point behind calculating customer’s lifetime is finding the financial value of each customer in a specific period. And the customer’s lifetime differs depending on the difference between the revenues and the costs associated with the customer relationship during a specified period.
Customer’s lifetime calculation is composed of four main steps:

1. Remaining customer lifetime calculation.
2. Future products that are most likely to be paid for.
3. Delivering costs of the future products.
4. Net present value of the amounts that have been paid.

Many ways can be used to calculate customer’s lifetime. One of these ways is the following formula:

Where:
CLV= customer’s lifetime value.CG= yearly gross contribution per customer.
M= retention costs per customer per year.
n = the horizon(in years)
r= yearly retention rate.
d= yearly discount rate.

If you find the above formula difficult to apply, and you haven’t collected enough data about your individual customers yet, you can you a simpler more friendly equation as below:

Customer Lifetime Value = Average Value of Sale × Number of Transactions × Retention Time Period × Profit Margin

Calculating your customers lifetime can highly help you indicate where do you see your travel agency many years from now, how efficient your employees are, how good the services/ products you offer are, and how fast can your travel agency grow.

The above formula can also help you decide the rate of discounts you can offer for your customers, also which strategy to use to maintain your new customers and the loyal ones.
Below are some advantages of detecting your customers lifetime:

1. Gain more loyal customers.
2. Offer higher quality services if required.
3. Plan for further strategies your travel agency might need.
4. Better discount management.
5. Deciding future products and customers engagement with what your travel agency offers.
6. The percentage of customers that have stopped visiting your travel agency in one year.
7. Draw clearer path for the marketers in your travel agency to follow.
8. Better collection and more accurate analysis of your customers data.
9. How long can your services and products last?

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