Customer lifetime value is a primary metric for understanding your customers.
To be more precise, it's a prediction of the value your relationship with a customer can bring to your business.
This approach helps organizations demonstrate the future value they can generate from their marketing initiatives.
Here at Ibmi Media, as part of our Server Management Services, we regularly help our customers to deal with CLV queries.
In this context, we shall look into methods to increase Customer Lifetime Value.
We can grow our business in two ways. The first and foremost method is to acquire new customers.
On the other hand, focus on retaining existing clients and increasing their lifetime value.
Data shows that the second is a far more effective strategy for producing a steady, predictable increase in revenue.
The longer we keep a customer, the greater is the provided value during their relationship with our brand.
More about Customer Lifetime Value?
Customer Lifetime Value is a metric that shows how much net profit a company can make out of a customer over time.
Hence, a high CLV means more revenue for the company.
Since each client is valuable, the company should be able to spend more to acquire new users and retain the existing ones.
How to Increase Customer Lifetime Value?
Increasing CLV can be as simple as switching the billing cycle from monthly to yearly, or as tough as overhauling a customer support process.
Moving ahead, our Support Experts discuss the tactics to increase and generate more revenue from our existing customers:
1. Improve the Onboarding Process
When it comes to customer success, onboarding should be among the top priorities. More often, poor onboarding occurs to be the leading cause of churn.
This is the point where our customer really engages with the products and where we can make the greatest positive impact. This being said, it is extremely important to put together a strategic onboarding process to encourage new users to come back for more.
This can be done with the use of walkthrough guides, interactive how-to videos, wrapped tutorials, and other content that might help customers in fulfilling their requirements.
Focus on communicating the value of your offering right from the start. Test and monitor onboarding approaches and act upon them.
2. Keep Customers Engaged
Email marketing is one of the best ways to retain customers.
However, most of us go wrong about it. Instead of sending value-packed content, we run automated drip campaigns.
The best emails are those that emphasize product/service value.
From a CLV perspective, an email that explains the benefits we bring in goes a lot further than any random message.
We can also choose to educate our customers. The key here is personalized content.
Here we need to get rid of sales pitches, look into specific customer needs, and suggest ways to solve their problems using our product/service.
Listen to your customers. Growing your business with detailed, actionable feedback, is a far easier process.
Your main goal is to make yourself visible as a reliable source of knowledge.
3. Offer High-End Customer Service
Quality customer service is a necessary investment to help businesses grow and increase retention.
It is more likely for our customers to opt for our competitors even if our product is above average if the service we provide is below average.
Data reveals that one-third of consumers are likely to switch brands after a single instance of poor customer service.
As such, it is important to get customer service right.
Better customer service will make existing customers more likely to become loyal long-term clients.
Our Support Experts suggest the following to provide quality customer service:
i. Provide 24/7 Support
ii. Offer Omni-Channel Support
iii. Offer Live Chat Support
iv. Monitor Social Media
v. Maintain a Knowledge Base
4. Build Relationships
Fostering good customer relationships is critical to the ongoing success of your business. Studies show weak relationships account for an average of 16% customer churn.
Throughout the interactions with a client, it is important to nurture a healthy bond. The key is to make them feel listened to and appreciated, knowing they are dealing with a professional team.
Be proactive and monitor customer health by connecting with them on a regular basis. Don’t go to them only when you have something to sell.
To improve a quality relationship, we can get feedback and updates, conduct quarterly business reviews, etc. Make them feel granted with the individual attention they deserve.
Send out customer satisfaction surveys – NPS and CSAT. We can calculate the NPS score by subtracting the percentage of Detractors from the percentage of Promoters.
5. Work on recurring issues
The idea is to look into customers’ feedback, and identify the most frequently recurring issues.
NPS surveys allow us to collect actionable feedback and detect common pain points for both Detractors and Passives.
We have to prioritize depending on the frequency of occurrence.
Then, we need to inform the appropriate departments and make up for the issues. In addition, ensure not to repeat them in the future.
Needless to say, the sense of urgency in fixing problems is a must.
6. Offer a Personalized Experience
Service, product, and experience personalization are paramount nowadays.
Our Support Experts discuss a couple of ways personalization can help enhance customer lifetime value in the long run:
It helps deliver messages through the right channel at the right time.
Better knowledge of customers can significantly improve the onboarding process.
Helps our product deliver a better customer experience with a more intuitive UI.
We can craft highly personalized in-app messages for each customer segment, increasing the odds of converting clients to a higher-paid subscription.
With a better understanding, it becomes easier to perform cross-selling and upselling.
Helps to deliver better and more meaningful customer support, and help clients to feel like they have an actual relationship with your brand, instead of just being a source of profit.
7. Use Customer Success Software
Customer success software helps to prevent churn, increase expansion, and manage more customers with less effort.
Basically, it analyses and creates a health score. Said score will make it easier for the team to segment and prioritize existing customers by customer profile.
In addition, it gives you a 360-degree view of clients and makes it very easy to spot potential problems that can result in customer defection, inactive customers, and profit stagnation.
It is also an excellent means to save time since it usually integrates with CRM software, social media management tools, and help desk software.
Customer success data highlights the "healthiest" clients, essentially letting executives know exactly who to concentrate their feedback gathering efforts on.
All in all, customer success software is a great way to take some pressure off your shoulder.
8. Encourage Customers to Switch to an Annual Billing Cycle
If you sell a recurring product or service (for example, web hosting), the total amount of time a customer pays for it is one of the most important figures for impacting CLV.
Customers that stick with the product drive predictable revenue.
The prepaid money could be reinvested into your company and product development.
Look at it as if a customer is investing in the company's growth by lending money at zero interest.
Another advantage of switching to the annual billing lifecycle is that it makes it easy to forecast and predict revenue.
9. Upsell and Cross-Sell
If you sell several complementary products or services with different pricing tiers, upselling is one of the easiest ways.
Upselling is the art of selling a more expensive version of a specific product or service.
Cross-selling, on the other hand, is the art of selling a similar, complementary product or service to your customers.
For instance, a business looking to buy a website domain would likely be interested in other services too. Hence, they are a natural choice for us to cross-sell and increase the value of the transaction.
Here are some great tips for cross-selling and upselling to your current clients:
i. Offer bundle products
ii. Offer temporary upgrades
iii. Use a sidebar widget with popular choices
iv. Add complimentary products at checkout
v. Free shipping with a minimum spend
vi. Keep recommendations limited
10. Implement a Dunning Management System
It is a solution that automatically retries a failed payment or expired credit card and sends a drip of renewal notifications to customers whenever a charge to their credit card is declined.
Freezing a customer’s account too fast in such a situation can negatively impact the experience they have with your company. Of course, we can’t decline charges.
However, dunning management can enable automatic charge retries. This way, accounts are not closed prematurely and we can charge the card again a couple of days before the account should close.
Many clients would likely appreciate reminders since it saves them time rather than manually finding the due date.
And, of course, the automation offered by dunning management saves us plenty of time.
11. Increase Your Pricing
As a business, it is natural to want to increase pricing as we grow due to various reasons. It can be for various reasons.
It is quite common for companies to underprice their services when they first start out, after all.
In any such case, we can give customers a choice and make them feel in control.
Provide a set of options for existing customers so they have the opportunity to decide what suits them better.
This way, we get to make more profit while also giving existing customers enough time to get to willing start paying more for the services.