One of the primary metrics that small companies forget to include in their goals is Customer Lifetime Value (CLV or CLTV). It helps to measure your business campaigns and cross-checks with the revenue and business objectives. It basically reflects the health of your company.
Unless you know how your campaigns are performing to generate revenue, it is eventually going to impact the long-term existence of customer relationship and also the business itself.
What is CLTV?
Customer Lifetime Value, or simply CLTV, is the metric that reflects the total revenue generated from a single customer account over the lifespan of the customer.
It is also related to the cost of acquiring customers (CAC), which means how long it takes to recover the investment required to acquire new customers.
The cost of retention is less expensive than the cost of acquisition. However, companies still keep investing a lot to create new leads and customers for their business than investing in retaining the existing ones. Thus, a company could face losses when desired customers are not acquired over a defined duration.
What are the strategies to increase CLTV that help you boost profits?
- Increase sales per order: Your goal should be to encourage customers to spend more money on every transaction.
- Increase sales over time: Your second strategy for increasing lifetime value should be to increase the number of transactions over a given time. Multiple transactions would help you to receive more revenue from single customers in a given lifespan.
- Reduce costs to serve customers: While it’s essential to retain existing customers, your focus should be to reduce the cost of retaining customers that includes a reduction in the cost of product packaging, shipping and answering customer queries.
So how could you implement the strategies mentioned above?
1. Focus on Brand Loyalty:
Establish frequent and consistent communication with your existing members to increase sales over time. Deliver your brand promise to increase brand loyalty and brand advocacy over time.
Email campaigns to deliver offers and discounts on customer birthdays and special moments could be the start of establishing a connection. Send newsletters and updates on upcoming events to make them feel that they are important for your business.
Use social media platforms for initiating the conversation with direct customers and community members. Start contests for fans of your brand and encourage them to participate in such events.
2. Personalize Communications:
Be creative and use customer data to deliver customized and personalized content and offers. It allows customers to find relevant messages delivered to them.
Use technology to track online customer behavior and display products similar to the last search and purchase. Enable your website to recommend similar or frequently bought together products.
3. Exclusive Offers for Loyal Customers:
Reward your loyal customers with discounts and gifts. Create events for them to participate and provide guaranteed winning prizes in return.
4. Details Matter a Lot:
Add a Wow factor to your customer satisfaction process. Go the extra mile and take time to personalize product packages. Slip-in a customized message for the customer to bring a smile on their face. If possible, add coupon code for the next purchase on the site.
5. Re-engage with Customers:
Every business has customers who haven’t purchased anything from your company recently. In such a case, re-engage with those customers via emails or SMS to remind them of ongoing offers and entice them to come back to avail more by purchasing products.
It requires continuous effort and your focus on customer satisfaction to increase customer lifetime value that could boost profit for your business. Do not forget to take the help of technology for tracking customer behavior, personalizing content, and displaying recommendations on the website.