What do America’s longest running companies all have in common? They focus on the big picture: customer lifetime value.
If you want your business to last, you need to prioritize customer lifetime value, too. To succeed in today’s customer-centered economy, you can’t simply focus on attracting new customers. After all, there are plenty of competitors to choose from, and customer expectations are higher than ever. Instead, view each customer in terms of their lifetime value, meaning the total amount they may spend long-term if you retain them.
For companies willing to evolve, the benefits of customer lifetime value are many. By cultivating customers who have a high lifetime value, you can ensure stable revenue for years to come. But first, you have to know how to retain them.
The Benefits of Customer Lifetime Value
When you emphasize customer lifetime value, you can cultivate a base of loyal customers to ensure steady returns on a regular basis. This strategy will secure your market presence for decades to come.
Cultivating customer lifetime value:
- Is Cost-Effective: Convincing a new customer to make a purchase is an expensive process. It costs advertising dollars and requires sales people and sometimes even the collaboration of several different teams. By simply keeping the customers you already have, you avoid paying these expenses a second time.
- Fosters Brand Loyalty: Customers with high customer lifetime value have proven their loyalty, and loyal customers are likely to spread good word-of-mouth about your brand and evangelize online. This provides unsolicited testimonials, which potential customers see as highly credible, and improves your brand reputation.
- Saves Time: Knowing each customer’s customer lifetime value helps you identify where your customer success team’s efforts are most likely to pay off and who would benefit from an upsell. High customer lifetime value clients already have a track record of bringing in strong revenue, so go straight to this group when looking for growth areas.
- Predicts Churn: Customers with high lifetime value are less likely to churn. They have a track record of success with your product and aren’t likely to leave unless something changes dramatically.
Of course, the higher your customers’ lifetime value is, the more your company will profit. So, the more work you put into raising customer lifetime value, the more revenue you’re likely to bring in.
How to Reap the Benefits of Customer Lifetime Value
If your business is looking to focus on customer lifetime value, you’re in luck. There are many best practices that will help you foster positive customer lifetime value, including:
Increase Your Number of Repeat Customers
Move away from just thinking about single-purchase customers so you can encourage customers to continue using your product. The goal is to cultivate more repeat customers until they make up the majority of your sales. You can start simple, with the goal of getting one-time customers to come back for a second transaction. Some ways of doing this include contacting the customer to remind them of the value your product offered them. Depending on the product or industry, you could make follow-up phone calls. You can also ask for feedback. Whatever you do, remember that winning a customer back for a second purchase means starting a relationship with them. As time goes on, you’ll form a lasting bond with the customer.
Next, focus on getting repeat customers to increase their order frequency rather than trying to raise the amount spent per order. This gets customers in the habit of buying and using your product. From this point on, focus on raising customer loyalty. You can do this by implementing customer loyalty programs or connecting with customers through feedback surveys, special offers, or other rewards. As the number of loyal customers increases, you can expect more revenue that doesn’t come at the expense of your advertising budget.
Onboarding begins as soon as the transaction is complete and lasts until your customer learns how to use all your product’s features. If customers don’t fully adopt your product and gain value from it during onboarding, they run a high risk of churning—higher than any other stage.
Be sure to communicate the value your product offers from the very start. Provide how-to videos and tutorials. Monitor your product use and if you see a reduction in the frequency of use, alert your customer success team so they can offer help.
Provide Value Constantly
Continue to provide value, even when the customer moves into the adoption and renewal stages. Engage customers through tactics such as by releasing new features or periodically sending automated communications. These messages can provide information such as how much money your product has saved the client, information about their resolved support tickets, or how the customer is progressing toward certain goals. Never stop proving your product’s worth to your customer and you’ll eliminate one of the greatest causes of churn.
Retain Customers for Life Using Customer Success Software
Customers have plenty of choices in today’s customer-centered economy, and if your company prioritizes the pursuit of short-term revenue, customers will be more likely to churn. Instead, ensure stable revenue from loyal customers by cultivating the benefits of customer lifetime value.
But cultivating customer lifetime value doesn’t happen overnight; rather, it requires a dedication to enhancing the customer lifecycle long-term. If your business is having trouble engaging customers in meaningful ways, try using customer success software. It can give you the functionality you need to measure, respond to, and improve every stage of the customer journey.
America’s oldest companies have lasted this long because they’ve built loyal customer bases by adapting to meet changing customer demand over the years. Give your success team the functionality it needs to provide deeper customer engagements and your business can last a lifetime, too.