How to Increase Customer Lifetime Value And Boost Profits
It's cheaper to retain customers than get new ones; use these three strategies and five tactics to keep the ones you have. Your bottom line will thank you.
It’s far less expensive for a business to retain customers than it is to acquire new ones, yet most companies continue to invest significantly more money into customer acquisition than retention. As a result, they do acquire new customers, but they lose a lot along the way.
Keep this in mind as you plan your next marketing budget. It just might make sense to shift some of your marketing investments into retention initiatives and away from acquisition initiatives. First, you need to develop strategies and specific tactics to make those strategies drive positive results for your business.
Strategies to increase customer lifetime value.
There are three key strategies your business can use to increase customer lifetime value (CLV). If you don’t pursue one or more of these strategies, it’s unlikely that you’ll see a big uptick in customer retention or customer loyalty toward your brand anytime soon. Let’s take a closer look at each:
Increase sales per order: The first strategy to increase customer lifetime value is to increase sales per order. Your goal is to motivate customers to spend more money on every transaction.
Increase sales over time: The second strategy to boost CLV is to increase the number of sales your business closes over time. While the first strategy focuses on the value of each individual transaction, this strategy focuses on the quantity of transactions.
Reduce costs to serve customers: The third strategy to increase CLV is to reduce your business’ costs to serve customers overall. This includes all costs from packaging products for shipping to answering customer service calls. The lower your costs to serve customers are, the greater the value of each customer to your bottom line.
Tactics to implement your strategies.
Once you have your strategies to increase customer lifetime value, you need to identify the tactics to implement those strategies. How will you turn your strategies into action?
Fortunately, there are many options available to you. Any steps you take to improve the customer experience should improve CLV. Here are five tactics to help get you started:
To increase sales over time and build customer lifetime value, you must communicate with your customers on an ongoing basis. The secret to building a powerful brand is developing a relationship with customers that leads to brand loyalty and brand advocacy over time. That starts with consistently delivering on your brand promise, meeting customer expectations for your brand, and communicating with them to build brand trust.
Email marketing is an excellent tool for communication that leads to increased CLV. Send campaigns on customers’ birthdays and anniversaries with special discounts. Don’t be afraid to get creative. You can also leverage the reach of social media to communicate with customers. For example, feature fans in user-generated content contests on your Facebook page, and share useful, meaningful information.
Customer service is an essential part of communication. If your customer service communications are poor, you’ll have a very hard time increasing CLV. Make sure customers have a variety of customer service options, including chat, email, and phone. Furthermore, make sure your customer service team is available during extended hours. We live in a 24/7 world, and offering customer service only during regular business hours is rarely enough to keep customers satisfied.
Personalized content and offers are critical to building customer lifetime value. Today, marketers have access to so much data that it’s much easier to offer personalized product offers, promotions, and more to specific customers or customer segments.
Leverage dynamic content on your website and in your email marketing, so customers always see the most relevant offers to them. For example, show related products that customers might be interested in when they view specific products on your website or when they add certain products to their online shopping carts. This is a great way to increase sales per order!
It’s important to recognize and reward your customers by creating exclusive offers and programs for them, particularly for your most loyal customers. Create frequent shopper programs and other loyalty perks that make your best customers feel special.
Furthermore, make sure it’s extremely easy for customers to make repeat purchases from your business. For example, ensure your ecommerce store offers easy password and username retrieval, and offer to save shipping and payment information in customers’ accounts so repeat customers don’t have to type that information all over again. Every step that you can remove in the purchase process will increase sales.
Details matter a lot. Even though customers have purchased products or services from your business in the past and may have been satisfied with those experiences, you can’t cut corners on future communications or transactions. Remember, user experience is critical to building customer loyalty and increasing retention and CLV.
With that in mind, go the extra mile to get the details right. For example, when you ship products to consumers, do you just toss them into a box or do you take some extra time to make sure the presentation a customer sees when they open the box is in line with your brand reputation and brand promise? Something as simple as packaging could create a wow moment that adds to customer lifetime value.
What do you do to re-engage prior customers who haven’t purchased anything from your business or opened one of your email messages recently? You can’t expect them to become repeat customers if you’re not trying to re-engage them. You can do this through email remarketing. Send messages to customers who haven’t purchased anything from you in three months or who haven’t opened your email newsletter or promotional emails in six months. Offer them something special to come back and buy again.
Re-engagement should happen in real-time, too. Send emails to shoppers that abandon their online shopping carts. Retarget ads to people who visited specific pages on your website but didn’t buy. Both are tactics to increase sales from new and prior customers. Don’t let them get away! Instead, re-engage them with your brand and remind them of what they’re missing when they don’t buy.
Increasing customer lifetime value is dependent on your ability to develop both long-term strategies and short-term tactics to implement those strategies. Test these tactics immediately to boost your CLV. Remember, few companies invest enough in customer retention. That means your competitors probably aren’t investing adequately in CLV tactics, either. In other words, prioritizing customer loyalty and retention gives you another way to get a jump on the competition.
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