For established businesses, it’s cheaper to retain an existing customer than acquire a new one. This is an age old saying and it still holds meaning today!
For the starters, statistics prove that there’re around 70% chances of making a (new) sale with existing customers and only 20% with new prospects. This alone shows how fruitful it can be to have your current customers stay committed to your association in the long term. But the question is how do you accomplish this?
Well, one of the foremost ways you can get this done is by enhancing the customer lifetime value.
Customer Lifetime Value: An overview
Customer Lifetime Value (CLV) can be described as the revenue they will bring to your brand by being a customer, throughout their entire lifetime. So, as you can see, it’s not about cracking a deal to make ‘a sale’. Rather, it is about a lifelong commitment, to which both the parties need to stay loyal. While your customer needs to continue the purchase cycle, you, as a brand, need to make the association valuable and worthwhile for your customer to continue the cycle in the first place.
You can boost about 25% profit by increasing customer retention by 5%.
So, how do you calculate the CLV?
Simply by multiplying the average order value by ‘the’ customer’s purchase frequency and then dividing this by the average customer lifetime.
Now, that you have the values calculated for each customer, here’s how you can enhance that experience (value). To begin, there are aplenty ways in which you can increase the customer lifetime value; a few of the most popular, and ‘sure-shot’ ways are highlighted below.
Simplify the on-boarding process
When a customer first engages with your brand, use the opportunity to impress them so they return to you every time. Make the most of the first impression opportunity by simplifying the process via clear and effective communication, a fast and simple on-boarding, and a personalized experience if possible. Give your customer the chance to recommend your on-boarding (brand) to others. This is the best way to set the tone for an enhanced CLV for the customer.
Engage through content
The other way in which you can boost the CLV is by providing relevant, authentic, and engaging content. Be it through your website, official blog or social media handles, remember to post regularly and engage with your customers. You can also explore other means of communication, such as email marketing, webinars, newsletters, video content, and so on. The idea is to provide value-loaded content to keep your customers engaged.
Acquiring new customers can cost you 25x more than retaining an existing customer.
Offer personalized services
Nothing beats the value a brand can generate by offering customers a personalized experience. Not just at the time of on-boarding, everyone loves a customized experience, every time. A few ways in which you can create this is by being available for 24×7 support, offering multi-channel assistance (phone support, chat, social media, etc.), and by maintaining a robust knowledge base (video tutorials, how-to content, etc.). When you show that you are available to assist round the clock, your customer will be that much more confident about your brand. Also, a knowledge base with details carrying every thing that your customer needs to know about your brand (product/ service) will add value to their experience.
Take prompt action on genuine feedback
Asides the above, it’s essential to seek feedback from your customers regularly. While this can help you identify the recurring pain points, it can also enable you to gauge their reactions on a new arrival. So, customers that will take out the time to offer you feedback will indirectly show you that they value your relationship. Take prompt action in the areas that need your attention. Don’t let that standalone ‘poor experience’ define the entire experience your dissatisfied customer will remember. Your brand is much more than that. Exhibit it clearly and see how much this will boost your CLV.
Another way to enhance the experience and add to the CLV is to nurture the relationship you have forged. This can be attained by improving your customer experience. From maintaining the quality of your service to sticking to your delivery commitment, and moving on to maintaining your reputation online – everything counts. A bad experience can be magnified and shared online leading to serious repercussions; remember to address every negative comment or review promptly and ensure that fixes are deployed to not only resolve the error but also to reverse the experience. A poor experience can lead to a lot of backlash for your brand.
80% future revenue will come from just 20% of your current customers.
Introduce loyalty programs
To leverage the advantages of an enhanced CLV, remember to introduce loyalty programs for your valued customers. A discount, reward points, free shipping, free upgrades, and complementary products/services, and so on are a few ways in which you can boost their experience and thus the CLV. Irrespective of the industry, whether B2B or B2C, a loyalty program almost always works.
Simplify the billing cycle
Customers dread having to go through the same, monotonous, lengthy billing cycle every time one gets over. As a fix, you can offer to move them to an annual billing cycle or something similar. Increasing efficiency while reducing the efforts and preventing wastage of time works like charm.
The highlight of calculating CLV is that it allows you to identify and segregate your customers. The better you know your audience, the better you can make the experience for them while engaging with your brand. So, once the CLV calculation is in place, you can plan your advertising calendar and make tailor-made communications to best connect with and nurture your relationship. This can alone set you on the path to boosting sales and increasing revenue for your brand.
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