Customer lifetime value (CLV) is a vital metric for businesses to better understand customers and stay ahead of the competition. It is a key indicator for organizations to better understand long-term and financial viability. Additionally, it provides a customer-centric perspective that can enhance sales and marketing strategies to estimate the company’s growth.
CLV is the total revenue a customer is expected to spend in a business over a lifetime. In other words, it’s the amount of money a business would make from a customer before they churn. And unless a business knows exactly how much money one customer can generate, they won’t know how much to spend in order to acquire more customers.
Having a high CLV comes with a number of benefits and can translate into:
- Brand loyalty
- Increase in sales
- Recurring revenue from existing customer
Although there is no “one formula” that can be used to compute customer lifetime value, here is a general formula to calculate CLV:
Customer lifetime value helps businesses improve the customer relationships and make smarter decisions. Let’s dive into seven proven strategies businesses can try to help increase CLV. Incorporating these strategies will help organizations understand the audience better and truly give them what they need.
1. Make it Easy to Buy
Businesses should make it as convenient as possible for customers to purchase their services or product quickly. Additionally, the fewer the clicks a customer has to make, the higher the chances they will make the purchase. It’s important for businesses to evaluate how many clicks customers currently need to make in order to purchase something. Simplifying the process will help ease the customer experience.
Having a complicated process to purchase a product or service can be frustrating for customers and can have negative repercussions on the customer experience. It’s also good to remember that making the customer experience seamless in the buying process is not only about the actual steps they need to take, but also the information that leads them to make a purchase.
2. Provide Exceptional Customer Service
Delivering quality service to customers is a necessity for businesses of all sizes and industries. Data shows 58% of American consumers will switch companies because of poor customer service. As such, when clients receive good customer service, they have a better customer experience. If they have a good experience, they will most likely become loyal customers as well.
Common pain points, such as long wait times and unrelated answers, can have a negative impact on the customer experience. On the other hand, omnichannel support (text, email, live chat, phone) is a good and fast way to increase customer lifetime value and provide quality customer service. Particularly when it comes to repeat customers, delivering good customer service is key.
3. Create a Customer Loyalty Program
Loyalty programs offer rewards and discounts to customers for staying loyal with the business and it’s vital as it can drastically help increase customer lifetime value. Offering discounts and exclusive offers will incentivize current customers to make repeat purchases otherwise would not have been made.
It’s also important to keep in mind that creating a customer loyalty program is not enough, businesses need to continuously work to encourage loyal customers to actually use the program. Additionally, collecting data from current members on the program will also provide insights and a better understanding of the customer base. Based on the data, businesses can leverage the information to improve the customer experience next time they visit.
4. Focus on Quality
It’s important for organizations to make their brand synonyms with quality. Improving the product or services can be a direct correlation to improving customer retention. A vital component of building customer lifetime value is getting customers to invest in the business. After all, there is no replacement for quality products and services. Focusing on quality will differentiate companies from the competition and capture the attention of new and recurring customers.
Being able to identify the customers’ pain points and provide effective solutions is essential for businesses to grow customer lifetime value. This also helps organizations identify and prioritize pain points that need to be resolved immediately. Essentially, it’s creating a customer-first strategy in order to support their needs.
5. Request Customer Feedback
In business, there are always opportunities for improvement. It is important for companies to listen to their customers and don’t be afraid to ask for feedback. After all, customers that are happy will likely stay long-term with the business. Furthermore, receiving actionable feedback from customers can help the company prioritize which areas to focus and improve on first.
It is recommended to collect and store all of the customer feedback in one place and share across departments. A notable way to receive real data from customers is through customer satisfaction surveys. The surveys can help businesses understand what customers think of their products or services, and the brand overall.
6. Produce Compelling Content
Content marketing is an efficient tactic to retain existing customers and get new ones. However, in order for customers to engage with the content, businesses need to provide value to them. For example, creating targeted campaigns focused on solving customers’ pain points. Sharing educational content and resources will have a greater impact on consumers as well.
Businesses must remember that every interaction in the customer journey influences the customer lifetime value. Building an engaging content strategy with insightful information will help customers stay engaged and loyal over time. The content should be of high quality and a reflection of the organization and the brand.
7. Optimize Customer Communication
Personalized communication is key to customer retention and it can deliver more meaningful customer support. Additionally, personalization goes hand-in-hand with excellent customer service. Businesses can craft highly personalized messages and improve the onboarding process for customers based on the feedback received.
Highly personalized interactions with customers foster a sense of appreciation and respect for businesses that can eventually turn into advocates for the brand. There are a variety of ways to leverage a personal touch that can help cultivate customer loyalty, including, addressing emails on a first-name basis, special rewards, or even hand-written thank you letters.
That’s Just the Beginning
Customer lifetime value is crucial for businesses. Interested in learning more? Check out our recent webinar with GoDaddy’s Senior Data Scientist on Evaluating Customer Lifetime Value. Zach King showcases a framework to visually understand customer performance and drive-long term success.
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