Customer Lifetime Value (CLV): What is it and how to improve it?

Hermes_Fang

Customers are the lifeblood of any business. Keeping your customers happy and returning after they've made a purchase is most likely the primary goal of any e-commerce store. Nonetheless, many businesses overlook the significance of customer retention.

But why is customer retention so important to a company's success? The answer is found in the lifetime value of a customer. The amount of revenue a customer will generate for your company over the course of their customer journey is referred to as the customer's lifetime value.

Today, we'll look at ten strategies for increasing customer lifetime value.

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1. Building Trust by Doing the Simple Things Right

Trust is the bedrock of any relationship. However, businesses frequently overlook this and instead focus on secondary parameters such as profit maximization, increasing sales, and scaling customer acquisition. Companies should prioritize developing a 'Trust Mindset' with their customers.

Loyalty cannot be purchased; it must be earned through repeated actions.

An increase in customer lifetime value (CLV) is a natural result of a brand's genuine focus on developing a trusting relationship. Building trust over time necessitates tremendous support and unwavering effort. However, once that trust is established, your customer will become your best promoter.

Make certain that your customers do not feel isolated after purchasing your product. Doing the little things correctly can go a long way toward increasing your customer lifetime value.

2. Building a Community

If you don't want to be a faceless service brand, immerse your customers in your world and help them collaborate with other users to get the most out of your products and services.

When we think of a community, we envision a close-knit group with common goals and aspirations. The same is true in business, and if you can onboard customers and provide a venue for them to interact with like-minded individuals or businesses, you can increase loyalty and, as a result, CLV.

They will become entwined with your products and services after participating in a community, both contributing to and receiving from it because their connection to it will have been knitted into the group that they now feel a part of.

Customers can now share their enjoyable purchasing experiences more easily than ever before thanks to social media. When it comes to marketing messages and business offers, people prefer word-of-mouth recommendations. As a result, a cult following is priceless when it comes to increasing your customer lifetime value.

3. Deliver Rich, Value-packed Content that Keeps Customers Interested

One of the most effective ways to retain customers is to provide comprehensive, value-packed content, but many businesses do it incorrectly. Instead of sending out useful information, they send out automated drip campaigns with little value.

Despite the fact that it is significantly less expensive for a company to retain customers than it is to acquire new ones, most businesses continue to invest far more money in customer acquisition than in customer retention.

There are two main methods for engaging customers and providing valuable content:

A. Offering Live Chat Support

Buyers expect businesses to respond and communicate with them in real-time. The best way to do this is via live chat.

B. Keep a Knowledge Base

A knowledge base is an essential component of your support infrastructure because it provides access to blogs, whitepapers, tutorials, video guides, and other supporting documentation. While putting one together will require some time, effort, and money, it will all be worthwhile.

A knowledge base will also relieve some of the strain on your support team. When a customer makes a request, for example, an automated bot can automatically refer them to a relevant knowledge base article or tutorial (or even before they do so). This will keep the customer happy by providing a quick solution or answer the majority of the time.

4. Create a Referral Program

Referral programs are easy to set up in almost any business, whether it is entirely online or has a physical location. Once set up, it's a great low-cost way to increase CLV.

Word-of-mouth marketing is frequently cited as one of the most effective methods of promotion. If someone tells you that a company, product, or service is worthwhile, it's usually because it's also worthwhile for them. When someone discovers the worth of something, they want to tell others about it.

This means that, if done correctly and with enough goodwill and sentiment among your customers, you may be able to convert your customer base into a low-cost sales and marketing platform.

Having your paying customers assist you in seeking new business increases both their CLV and the CLV of new customers recommended to you, who are then onboarded for a fraction of the cost of traditional prospects.

5. Gather Actionable Feedback

Collecting actionable information from customers who are pleased with your products and services will make them more likely to make another purchase from you.

It is difficult to expand your business without first learning what your customers think of you. Growing with specific, actionable feedback, on the other hand, is far more straightforward.

Understanding your customers enables you to focus on the aspects of your business that drive customer satisfaction and revenue growth while reducing ineffective practices. It also provides accurate information on how likely it is that your current customers will recommend your product or service to their friends.

You should absolutely collect and store all the feedback you receive in one place and share it with all departments.

6. Promoting the Annual Billing Cycle, Cross-Selling, and Up-Selling

Cross-sell and up-sell are two fantastic complementary sales techniques that are in high demand by sales teams all over the world. Your existing customers are your best cross-selling and up-selling prospects. They already know who you are and what your product or service is, and they have already spent money to work with you.

When selling modular systems or services, monthly invoicing is fairly standard. It has grown in popularity as a result of the SaaS model, which, as seen in Shoplazza and many other eCommerce website builders, gives customers the freedom to control the services they want at any time.

While this is beneficial to customers, and many businesses make it work, annual billing is a more secure strategy to ensure CLV.

You will reduce customer turnover if your customer is willing to commit to annual billing, absorbing the initial expense and sacrificing flexibility. Keeping your customers engaged will give you more time to cross-sell and up-sell, as long as you have guaranteed their billing and use of your service.

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7. Make Onboarding Simple

A strong onboarding process will keep your customers interested. It will give them a reason to return and use your product on a regular basis.

It's human nature to look for a less taxing way to complete a task. The same is true for our purchasing experiences.

Shoppers want simplicity, and nowhere is this more evident than at the beginning of the purchasing process.

8. Hyper-personalize Customer Experience

The term "hyper-personalization of customer experience" refers to the creation of products, services, and interactions that are tailored to the specific needs of your customers.

Personalization has become the new business differentiator, from greeting customers by their first name to tailoring offers to their preferences and interests.

Sending targeted communications to your dormant customers via email, text, or even snail mail will almost certainly bring you back to their attention. Doing so from the beginning of your collaboration may help you stay relevant and reduce churn.

A thank-you note is another effective marketing strategy for encouraging customers to leave a review. Send them a quick email asking how they are and how the product or service has helped them, along with a link to your website. If they no longer wish to receive your emails, you can give them the option to unsubscribe.

Product recommendations are another way to hyper-personalize and increase your customer lifetime value. They may appear to be a ploy to get you to buy more, but they have a significant impact on the consumer. Whether it's their first or 1000th visit, they're likely to glance over these add-on products. If the goods meet the buyer's specifications, they should be added to their cart.

9. Invest in Customer Success Software

Customer Success Software provides a consolidated, 360-degree picture of all your customer data, making it easier to identify potential issues that lead to customer defection, inactive customers, and earnings stagnation.

Customer success software helps businesses keep customers from leaving. This program can help you reduce customer churn, improve customer engagement and retention, and identify upsell and cross-sell opportunities. As a result, investing in customer success software can be an excellent way to increase your CLV.

10. Launch a Customer Loyalty Programme

To begin with, customer loyalty programs are not the end-all solution for keeping customers coming back for more.

A loyalty program, on the other hand, is a fantastic option as part of your efforts to increase CLV for your business. However, do not rely solely on this source, as many businesses do.

Use customer loyalty programs to create the community and referral schemes discussed in the article.

A Brief Recap

Customer Lifetime Value is based on the simple premise that "your revenue will increase if you value your customers." That's the only thing there is to it. It's a matter of demonstrating to customers how important they are to your company by soliciting and acting on their feedback, and then providing them with exactly what they require with the utmost convenience, first-rate support, and an unbelievably tailored customer experience.

The customer lifetime value model will assist your company in growing and flourishing. It increases your company's bottom line by lowering customer acquisition costs and saving money on marketing and sales activities.

In order to evaluate the CLV model in practice, you must have:

  • Obtaining, storing, and organizing the customer data needed to calculate CLV.
  • A scalable, adaptable business platform, such as Shopify or Shoplazza, that can handle growth;
  • Customers' purchasing habits.

If you want to build a business on loyal customers and brand ambassadors, you must go above and beyond what the average consumer expects. Brand loyalty, like any other asset, is not given away for free. However, as with anything worthwhile in life, it necessitates effort.

It's up to you whether that means putting your customers in the spotlight or providing exceptional convenience. Make it a point to do something that will make you difficult to replace and impossible to forget.

(Contributed by Saurabh Debnath & Hermes Fang)

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5 years experience in digital marketing. A gracious loser, not a lousy winner.

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