09 Aug Do You Pay Enough Attention to Customer Lifetime Value?
If you take the time to measure the success of your business…
Hats off to you!
It only goes to show that you’re making a conscious effort to maintain a good business performance.
What key metrics do you focus on?
Do you measure your customer lifetime value? If you’re not aware of that, I wouldn’t be surprised. You know why? Only 42% of businesses actually measure their customer lifetime value (CLV).
Let’s define CLV.
Customer Lifetime Value-Why Should You Care
CLV has to do with the value of customers based on their contribution to your business over the time span they remain with you. It enables you to determine the net profit that your customer generates in a lifetime. It’s the key metric that all businesses need to monitor to stay competitive and thrive in the industry. It is very easy to ignore, but without it, you’ll be clueless about the next step to take.
Just like other key metrics, you calculate CLV based on a mathematical formula. Don’t worry, the equation is not as complex as some of Einstein’s.
So here’s the equation:
(Average Value of a Sale) x (Number of Repeat Transactions) x ( Average Retention Time in Months or Years)
Knowing your CLV helps you to craft a strategy to retain customers. Retention is far less expensive than acquisition. This is probably why the successful companies I’ve worked at (including this one) push us so hard to focus on giving our existing customers an incredible experience and making sure they stay life-long loyal clients!
Here’s the truth: Retaining customers is not easy, you have to spend a lot of time focusing on providing value and going above and beyond what they expect to truly earn them for life!. You’ll have to be willing to do anything and everything (within your scope) to create lifetime customers.
Three Key Strategies To Increasing Customer Lifetime Value
Reduce business costs: As much as possible, try to cut cost on customer service calls, shipping, and packaging. When you reduce costs to serve your customers, you’ll increase the value of these customers.
Increase The Number Of Sales: As you reduce business’ cost, you should start focusing on increasing sales. This strategy is focused on increasing the number of the transactions you have with each client to start multiplying their value. Do this by constantly innovating and trying to figure out what your clients NEED and WANT!
Increase Sales Per Order: Once customers buy products or services from you, motivate them to spend more by offering an upgrade or other related services and upsells at the same time.
How do you implement these strategies?
The key to succeeding in increasing your customer lifetime value is by improving the customer experience.
- Communicate with your customers: I appreciate companies that go out of their way to follow up with existing customers. Asking if they’re happy with the product or service, making sure you meet their expectations. You don’t have to communicate with them face to face. With the advancements in technology, you can use email marketing as a tool for communication.
You’ll have a hard time increasing your CLV if you have poor customer service communications. Some customers may not be happy communicating with you through email. Give them other customer service options such as chat and phone. They will also appreciate it if your customer service team is available 24/7.
- Personalized each transaction: If you’re part of the technical support team, you base your pace on the customer’s profile. Do they know stuff related to your technology? Or do they have limited knowledge about your services? Whatever your line of business is, personalizing each customer interaction matters. Profile customers so you’ll know how to approach them. Some customers appreciate small talk while others want their problems resolved immediately.
When sending emails to your customers, it also helps if you’re aware of the products or services your customers might be interested in. You can do this by showing related products which is a strategy to increase your sales per order.
- Create exclusive offers: One way of increasing your retention rate is by offering exclusive rewards to loyal customers. These loyalty perks make your customers feel valued. For repeat purchases, make sure you make the process fast and simple. Repeat customers hate it when they have to type their payment information all over again. Better yet, offer to create an automatically recurring order!
- Don’t forget the details: Getting the details right means a lot to customers. If you intend to send them emails to know what they feel about your product, be sure to get the details right. Create the kind of packaging that is in line with your reputation and core values.
You need to have the ability to develop a long-term and short-term marketing plan to implement these strategies. If you feel you need a helping hand in increasing your customer lifetime value, we’re happy to help you create that competitive advantage.