Don’t Let ‘Em Go: 5 Strategies To Increase Customer Lifetime Value
To find potential customers, to attract their attention and to establish contact with them are very challenging tasks for any marketing manager. Thus, lots of time is spent on achieving these goals, while another even more important challenge is to win the loyalty of already existing customers and to reach a peak performance in customer satisfaction.
Despite the fact that winning the customer’s loyalty seems to be more suitable task for the customer support specialists, marketing experts realize that the practices of attracting and retaining customers are interrelated.
Below you can find 5 the most effective post-conversion strategies to increase the index of CLV (Customer Lifetime Value). Try to use them and the result will not be slow to arrive.
But first, let’s define what Customer Lifetime Value is and how it can be measured.
What Is Customer Lifetime Value?
Wikipedia: Customer lifetime value (CLV) is a prediction of the net profit attributed to the entire future relationship with a customer.
In other words, Customer Lifetime Value is the projected revenue that a customer will generate during his or her lifetime. CLV is one of the most efficient ways to analyze your acquisition strategy and estimate marketing costs.
Customer Lifetime Value Formula
Customer Lifetime Value calculation process consists of 4 steps:
- forecasting of remaining customer lifetime (usually in years)
- forecasting of future revenues (usually year-by-year), based on forecasting of future purchases
- estimation of costs for delivering those products or services
- calculation of the net present value of these future amounts
Companies typically use several different equations to calculate the CLV. The simpliest customer lifetime value equation could be the following:
‘Average Value of a Sale’ X ‘Number of Repeat Transactions’ X ‘Average Retention Time in Months or Years for a Typical Customer’
5 strategies to increase CLV
#1. Focus on Customer Service.
Marketing manager’s work does not end after the first conversion. Make sure that the customer got positive after-sales experience. It will help you to convert him or her into a regular customer.
According to the survey by Zendesk (cloud solution for technical support), the two most important factors in determining the origin of loyalty to the business are:
- quality offer (approximately 88% of consumers surveyed);
- customer support (72%).
The importance of product quality is obvious, but the service consumer support is rarely considered as a factor that critically affects the commitment and CLV.
How to improve your customers’ service?
There is a lot of ways of improving your customers’ service. You can provide them with free guidance; offer free upgrades. Make a quick call to your customers to be sure that they are satisfied with your product. Everything that shows your efforts in improving the lives of your customers will inevitably increase the level of their loyalty.
Remember, that providing excellent customer service, you can be sure that more and more of your customers will advertise your products or services in their social networks.
#2. Exceed expectations with the help of various surprises.
Anticipation of the purchase increases neuronal excitability in the nucleus accumbens (brain part with a large number of receptors of dopamine, hormone of joy). As a result, the person is experiencing positive emotions. However, after the transaction cognitive dissonance comes in the form of consumer remorse. The customer experiences negative emotions caused by regret about money spent or doubts about the correct choice. During this period users should get pleasant surprises, so that they could experience positive emotions once again.
How to exceed your customers’ expectations?
As an example of neutralization of buying regret here is a story about Marcus, who developed the offer for musicians, which included information products and hours in the recording studio. In order to eliminate cognitive dissonance he offered to get some more free products in exchange for a repost to Facebook. Within 5 days was obtained more than 250 repost, which brought 34 deals. In such a way Marcus increased public awareness about the trade offer, received over $2,000 profit and reduce the rate of return the product to 0%.
For exceeding customer expectations determine what emotions your customers are tend to experience after the transaction. Also keep in mind the degree of price sensitivity – the higher the price is, the higher the likelihood of consumer remorse.
If you had to buy tickets online, you’ve probably faced the upselling and cross-selling. According to the research by Amadeus IT Group (distribution system), upselling of such products as extra baggage, seats upgrade helped to collect airlines more than $36 billion per year. Upselling is widely used in e-commerce. For example, in the course of the transaction online store Ozon displays 6 windows Offer, complementing the core package.
What makes upselling the effective tool for increasing the average purchase size? The answer is quite simple: customers are not inclined to give up additional proposals included in the basic offer as standard.
How to use upselling?
Define the additional proposals that could be included in the basic offer – customers should renounce additional transaction, and does not agree to it.
#4. Automate marketing and communication.
There are several reasons why marketing automation has great potential, but, in fact, it is reduced to a simplification of personalization marketing. The formula is simple: personalization of marketing makes offers more relevant, and relevance to the customers’ needs makes them more prone to conversion, and therefore increases the income of the client.
How to use automation?
Create a diagram behavior pattern of visitors to determine which offers your customers need in a given period of time – this instantly gives you an opportunity to establish long connection with your customers. You can plan your newsletter, which will offer additional products and services on the various stages, which will be based on calls to action, such as a visit to a particular page or click on the button.
#5. Use the feedback to improve the product.
Feedback is a great short-term value rather than profit, but few companies want to collect this information. Feedback simplifies optimization of marketing campaigns and enables to satisfy customer’s needs better – consumers can provide valuable information that cannot be obtained independently.
A couple of years ago most people thought this was damn near impossible. But today when you have lots of tools to gather user feedback, you can’t neglect the importance of it. So here you’ve got two options:
- To improve CLV based on the feedback from your current users. User feedback tools will help you to encourage and collect the feedback of your real users.
- To make sure your CLV’s starting point will be high enough before releasing your app to the public. Usability testing will help you to see where your users are getting stuck and fix it, based on pre-release user feedback.
The most efficient way is to combine those two options – start with usability testing while your app is at the beta stage, and once it was released to the market – take care of your new users feedback. Constant improvement of your app usability will lead to the constant increase of your CLV index.
All the given strategies will help you to increase customer lifetime value. Let your customers be happy with your service!