Improving Customer Lifetime Value
We’ve discussed the importance of customer experience in previous blogs, and customer lifetime value (CLV) is one of the most important metrics to understand, defined as the total worth of a customer to a business over the entirety of their relationship, and the expected profits a company can hope to gain.
Measuring customer lifetime value can be simplified into customer revenue minus the cost to acquire and serve the customer, however this is very simplistic and there can be other variables to consider depending on the sector you operate in. For this blog piece, I will address the importance of, and how to improve customer lifetime value.
Existing customers are not just worth the value they attribute to the business at the time, they have a future value too, if they remain customers. It’s a well-known statistic that it’s five times more expensive to acquire a new customer than it is to delight an existing one, therefore it’s not just about attracting new customers and increasing customer numbers, it’s about focusing on increasing customer lifetime.
So how do you improve your customer lifetime value? Through customer satisfaction and customer retention, the two come hand in hand, and making your customers happier will usually result in them spending more and staying longer.
Regular communication and engagement
Communication is key, research carried out by Econsultancy showed that 86% of buyers are willing to pay more for a great customer experience. Communicating with your customers regularly will not only keep you at the forefront, it will also show them that you care. Keep them informed and tell them about products and services that might be of interest or more importantly, of value to them.
We often talk about good quality content and it’s still very much king, so continually deliver content that is of value to your customers, personalise customer communication and utilise the data available to understand their behaviour. Understanding who your customers are allows you to give them a completely unique experience, enhancing purchase frequency and value.
Make it easy for them
Making the buying process as easy as possible is crucial to increasing customer lifetime value, if you make the relationship with you difficult, you are unlikely to have future sales. Improving the user experience (UX) on an ecommerce website plays a big part, but the sales process should also be as simple as possible, ensuring customers always have a single point of contact, readily available information and an organised sales process. The same principles apply to any business looking to retain customers, and the key is a making sure they don’t have any excuses not to purchase from you.
Existing customers are the best people to ask what you could be doing better as a company as they are dealing with your teams directly and are likely to have a good insight into how your processes and services can be improved. Feedback can be collected in the form of surveys, calls, face to face meetings or reviews, but getting this information will allow you to understand where improvements can be made, and make them feel valued as a customer.
Increasing customer lifetime value should be a major focus when it comes to business growth, supported across the whole business. Having a clear idea of CLV will help provide meaningful insights when planning future marketing campaigns and improve future customer interactions. Increasing your CLV means you get more from existing customers, and in turn they will get more from you as a supplier.