Customer lifetime value (CLV) is one of the most important metrics for a business, and for good reason! Brands struggle to properly define and calculate it, but once you begin to understand which of your marketing campaigns drive customer loyalty and increase overall revenue, it’s an extremely valuable tool. So, with that said, what is it and how can we increase it?
Every business depends on its customers to drive profits for businesses and companies. Customers are one of the most important stakeholders of a business, and companies invest a lot of money into marketing strategies to retain them. Essentially, these marketing strategies aim to increase the pool of customers by promoting the services and the products the business offers. Living in the technology era, where you have a lot of promoting options, many businesses decide that the online world is the best place to promote its services. And it is true.
Online promotion can help a business skyrocket, but this also depends on the marketing strategy. Most businesses focus on attracting new customers, so they present them with lots of discounts and amazing insights in to products, and even though they manage to convert some visitors to their page into customers, they need to put effort into increasing the lifetime value. What businesses do not take into consideration is the fact that it is more expensive to attract new customers than to encourage loyalty – so what is customer lifetime value? How does it connect with customers, revenue, marketing, and your business?
What Is Customer Lifetime Value?
Marketing strategies that focus on increasing the customer lifetime value are well-designed strategies that take into consideration all the rules in which a relationship between a brand and a customer is formed. The nature of this relationship can increase sales, as you keep your customers loyal. CLV focuses on the loyalty of the customer, but also on the frequency in which they buy or use your products or services. A customer who buys your products twice a year will generate more revenue than a customer that buys your products once per year. And while this might sound simple, businesses around the world are looking for ways to improve their customer retention and make them loyal to the brand.
CLV is about focusing on loyal customers, it is about finding new and innovative ways of making them closer to your brand and building a relationship of trust. Attracting a new customer will cost a business five times more than making an existing one loyal. So, businesses need to rethink their marketing strategy and invest in building a strong relationship between them and the customers who already know who they are. In the online world where every website is full of ads that want to catch your attention, it becomes more and more difficult to create and design eye-catchy and attractive designs and ads. So, how can you increase the customer lifetime value? What you should do?
How to Increase Your Customer Lifetime Value
It might sound sophisticated and difficult, but this is an easy thing to do. Research has shown that the customers you already have are more likely to spend money on products or services you offer them. They spend over 30% more money, compared to new clients. So, if you want to increase the revenue of your business, you should focus on increasing your customer lifetime value. Here’s how.
• Send Surprises
This is a nice incentive that any business can do to encourage brand loyalty. It is important to keep in mind that people are more willing to buy from a brand they trust and that offer high-quality products at affordable prices. To make this connection stronger, businesses need to invest time in increasing the lifetime value by adopting nice practices. Sending surprises is one of them. Think about your customers and your products, and send them something they did not know they wanted. To build trust and loyalty, you need to show your customers that you care about them. Try including a handwritten note. You may find that customers post the gesture on social media, which unconfidently is a nice marketing strategy.
• Aim to Constantly Improve Your Communication with Customers
Communication is a key element of a strong relationship between brands and their customers. Giving the fact that there is competition in every domain, you need to make yourself stand out from the crowd. You need to treat your customers as your friends because this will increase brand loyalty over time. So, improving the way you communicate and interact with your pool of existing customers is essential. The first thing you can do is to send them emails with discounts on their birthdays, or a package including the customers’ most loved products. Their birthdays should be happy days, so why not make them better with a nice surprise? Being creative is important and do not be afraid to try something new. These out of the box ideas can increase the customer lifetime value, which will benefit your business.
At the same time, you need to take care of all communication channels. Customers will write reviews for your products, will ask questions, and leave comments on your social media pages. Interacting and replying to them will show that you care. And because you cannot only have happy and content customers, you will surely meet angry and dissatisfied customers too. Do not ignore them and do not make the mistake to think that they will not buy from you again. Keep and open mind, listen and help problem solve. Many businesses do not know how to handle conflicting moments with clients, so they choose to ignore or postpone those issues. This is a key element to consider especially if you have customer service. Make sure that communication is running smoothly and that your customers have a variety of options to contact you if they have problems.
• Exclusivity for customers
Discounts should be bigger than and different from the normal ones. And customers should feel that this deal is a really good one that they cannot miss. This means that you should analyse your customer behaviour and loved products so that you can offer personalised and exclusive deals.
• Build a re-engaging strategy
By looking at your website and social media analytics, you will be able to identify how many people have visited but did not buy anything. These might be new customers or existing ones, but building a re-engaging strategy will work for both of them. Some of them might have used your products and were not convinced of them. Some might be irresolute. Either way, you need to attract and make them engage again with your brand.
The best thing about the time we live in is that technology offers you a wide variety of options for ad targeting. You can target people who have visited your website and did not buy anything. You can target people who added products to their cart and ended up not placing the order. Or, you can target people who have not opened your emails for quite some time. Investing in a strategy of this kind will be profitable and rewarding, but the results are visible in the long run.
Customers are important stakeholders for business and companies that build products and services for large audiences. They help a business thrive and improve, so businesses should focus on building trust and making them loyal to their brand. Many businesses might fall into the trap of focusing their strategies on acquiring new clients, but investing in increasing the customer lifetime value is a better option. Most importantly, show that you care about them by constantly improving the way you communicate to them. Be open to listening to them, to consider their feedback, own your mistakes, and improve their experience. This will create a strong bond between your brand and your customers and will increase their loyalty to the brand and the customer lifetime value.