CLV (Customer Lifetime Value) is an essential metric for any business. It not only has a massive impact on your bottom line, but it also ensures cash flow stability and opportunities for new business.
But figuring out how to get your customers to stick around for long isn't easy. With competition becoming steeper in most markets, customer loyalty can be harder to attain, as the competition is aggressively trying to expand their customer base at your expense.
Luckily, there are strategies you can use to build lasting customer relationships and increase customer retention in the process.
Let's go over the definition of customer lifetime value and explore how you can create more loyal customers while also managing your new customer acquisition costs.
What is Customer Lifetime Value?
Customer lifetime value is an important metric that measures how much revenue you can generate from a single customer over their entire relationship with your company. By calculating your entire annual revenue and dividing the amount by your total number of customers, you can come up with a number that reflects how much you can expect to earn from individual customers over time.
In a world where profit margins are becoming tighter because of increasing costs per customer, having repeat customers is a considerable asset. Otherwise, you would be left trying to survive on new business only and would have to devote a considerable budget to attract potential customers who are also being pursued by your competitors.
Meanwhile, if your current customers are loyal and committed to your brand, you can expect a regular purchase frequency and can increase your marketing budget, resulting in a cumulative effect that drives growth both from new leads and loyal customers.
For example, if a customer buys a $20 product from you initially and then buys four other times for the same amount, they will have spent a total of $100. When you know that you can earn $100 from a customer over their lifetime with your company, you don't even have to earn back the initial cost of acquiring them; you can continue to regularly engage with them while offering products that they really need and accumulate profits over a period of time.
Proven Ways to Increase Customer Lifetime Value
Getting customers to buy from you again can be tricky. But there are proven tactics you can use to increase the average lifespan of a customer–delivering exceptional customer experiences being one of them.
Let's go over some of the best strategies for boosting the customer experience and loyalty below.
Expand Your Product Selection
It may seem obvious, but one of the best simple techniques to increase customer loyalty and lifetime value is to provide first-time customers with similar, complementary products or services they could buy.
Your existing clients are the most likely prospects you have for cross-selling which can be an effective way to increase the amount of money your customers spend on your business. So, before you explore other strategies for getting repeat business from valuable customers, think about any complementary products or services you could offer to build upon the initial product and solve additional problems your high-value customers might be facing.
As you map out your customer journey and learn more about your customersthem through insights, you'll learn the typical challenges they need to overcome and can offer relevant products tailored to the lifecycle stage they fall into to help them continue getting the value they want from you.
Ask for Feedback
Learning more about your customers is an integral part of focusing your marketing efforts and increasing the purchase frequency. The more you know about your most valuable customers, the better you can become at building a customer experience that they will come back for.
And to make that happen, you need to diversify your feedback collection methods and have the ability to analyze your customers' input. Using solutions like Alida CXM, you can collect customer feedback through interviews, surveys, and other methods, streamlining and automating parts of the process for maximum efficiency.
At the same time, you should be collecting feedback from reviews, customer service interactions, and social media. These types of interactions can reveal how your customers feel about you and give you direction on how to improve your current products and allow you to create experiences that keep your best buyers coming back for more.
A big part of customer profitability comes down to providing customized and relevant solutions to each customer. If you want to maintain high customer retention rates and keep making repeat sales, you need to avoid lumping them into a single group and treat your buyers as individuals.
For that to happen, you need to develop a way to segment your audience and provide personalized content based on customer behavior that enhances their experience and drives more sales.
Customer segmentation enables you to create hyper-focused promotional campaigns and increases, increasing engagement, responses, and sales in the process. And that's a winning combination for customer value maximization.
Leverage Free Trials
When you want your customers or new leads to take action, asking them to make a purchase immediately can be a significant obstacle to overcome. Even if a person trusts your brand and is considering buying, they might not be sure if the product fits their needs, or know whether they will get the value they expect.
To combat that, consider offering free trials that allow customers to try out your product without a commitment, as that can give them the final push into purchasing your product.
Once a customer sees your product in action during the trial period and starts using it with the help of customer success managers, they will be much more likely to commit to the purchase.
Make It Easy to Buy
Sometimes, making the sale can come down to your ability to make the process of completing the purchase easy and straightforward. Having a complicated or confusing purchase process can be very frustrating to your customers, even dissuading many of them from buying.
Therefore, when working on your customer experience, consider how you can simplify the buying process and provide your customers with everything they need to make a confident decision.
And it's good to remember that an effective buying process doesn't always have to do with the actual steps they have to take when buying; it's also involves all the information customers consume and engage with beforehand that helps them become ready to buy.
Reward Loyal Customers
Loyal customers are at the very center of increasing the customer lifetime value. They are the ones that will not only come to buy from you repeatedly, but they are also much more likely to become vocal brand ambassadors that spread your message and introduce your company to a broader audience.
Therefore, it's a strategic decision to implement steps to reward these loyal brand ambassadors through a loyalty program based on the customers' activities.
For instance, you could offer discounts and exclusive offers to customers who become repeat purchasers. You could also set up rewards for everyone that brings in a new customer, incentivizing recommendations and creating new business for your company virtually on autopilot.
There are countless methods to provide perks to the best buyers, and even though it can affect your profits, the long-term benefits that a good loyalty program offers are almost always worth it.
Run Split Tests
When it comes to making repeat sales, you can't expect to get everything right on the first try. In fact, you will likely have to fine-tune your strategies many times as you discover new insights about your audience or try to improve your customer experience.
Therefore, you should have an accurate and data-driven process of running split tests to figure out which approach works best in any given situation. By running controlled split tests, you can get a specific and actionable answer to almost any question you might have, which will provide you with a lot more confidence and maximize the outcomes you can get.
Provide Excellent Customer Service
Positive customer interactions are great. But sometimes, things will inevitably go wrong, and your customers will become frustrated and angry, especially if they don't receive timely help for their problems.
Therefore, when increasing customer lifetime value, you should make customer service an integral part of how you run your business. Only by having support that's available and capable of solving problems can you turn potentially negative experiences into even stronger bonds with your current customers.
Start by determining the most common ways your customers seek out help. It might be on your website, but it could also be on your social media platforms. Then, build an omnichannel support system that encompasses all the platforms, providing timely help wherever your customers might decide to reach out.
Increasing the customer lifetime value is one of the best ways to maintain stable growth, avoid fluctuations in revenue, and bring in new highly-qualified leads through word-of-mouth recommendations.
With the strategies listed above, you should have a much easier time getting your customers to stick around, especially if you make it a priority to establish two-way communication with them and analyze the interactions to cater to their needs.