Did you know that customers making a subsequent purchase spend 67% more on average than first-time buyers? Even if this is news to you, you undoubtedly already understand the value of retaining a customer as long as possible.
Not only is it cheaper to retain existing customers than to attract new ones, keeping customers coming back for additional purchases drives up their “lifetime value” (LTV) as well.
Typically expressed as “CLTV” or simply “LTV,” a customer lifetime value score is a critical performance metric that virtually every business should track and work to improve. LTV indicates the total amount of revenue that a single account will generate for your business over the entirety of the relationship.
For instance, if a customer makes a single purchase valued at $100 and never does business with your company again, their lifetime value is $100. However, if the same customer makes a $100 purchase every three months for three years, their customer lifetime value would be $1,200.
So how do you maximize LTV to generate more revenue and fuel rapid growth? While there are multiple potential pathways you could follow, let’s focus on one proven formula: Five easy steps that include the following:
Providing excellent customer support should always be at the top of your priority list. While achieving higher customer lifetime values across your audience base requires you to offer a top-quality service or product, the support you provide after the sale is equally important.
If customers love your product but have trouble getting the support they need when an issue arises, they likely will not do business with your company for very long.
While there are many ways to improve the quality of your support, you should start with offering self-service options and providing customers with multiple channels to communicate with your team. These two simple steps can drastically increase customers’ perception of your support quality.
Before modifying your current customer support strategy, you must determine where you currently stand. You will need to look past LTV and track several other key performance metrics to accomplish this.
For starters, we suggest determining your current churn rate. Customer churn, or turnover, occurs when a customer stops doing business with your company. Once you have calculated your average churn rate over a quarter or your fiscal year, you can calculate your LTV.
Keep in mind that this figure is an estimate only. However, it will give you a general idea of your current customer lifetime value. Naturally, the higher your LTV, the better.
Once you know where you stand, you can begin to systematically identify issues that might be decreasing your customer lifetime value. To identify these issues, reach out to customers for their feedback. Although it may be difficult to hear negative comments, when your brand is at stake it's a necessary step . The people who respond will provide invaluable insights that you can leverage to improve every area of the business. Improved LTV will be a byproduct of these improvement initiatives.
When soliciting customer perceptions, ask clear and concise questions they can answer in a few minutes . One of the easiest and most effective techniques for this is launching a customer survey program. Create questionnaires that are user friendly and take minimal effort on the part of the customer to complete.
While no one likes reading negative comments or feedback about their brand, you must approach the critiques with an open mind. Although a small percentage of customers will be impossible to please, the majority will have legitimate complaints or concerns. Listen to these complaints and create targeted action plans to remedy points of friction.
This step is where you can put all your newly gathered insights into action. It makes sense to refine your customer support model to better align with consumer expectations. You can also take steps like reevaluating your pricing system, modifying marketing content, and changing how you connect with consumers.
When creating marketing messaging, make sure to use clear language. Highlight your product’s capabilities, discuss your company values, and demonstrate how your service or goods can improve the lives of your target audience.
If the feedback you gathered revealed that your customer support capabilities are lacking, focus on making improvements in that area of your business. When you do not have the in-house resources to provide better support, consider using the services of an outsourced team.
A third-party provider can connect your customers with skilled agents who offer world-class support, all while driving up LTV and representing your brand in a positive light.
The final step in our formula to increasing customer lifetime value is embracing continuous improvement as a best practice. In this highly competitive environment, your business cannot afford to rest on its laurels. You should continuously - meaning every day - work to improve products, marketing, sales, and support.
Even once you attain LTV goals, your work is not done. You should use this formula in a circular fashion. After you have worked your way through all five steps, return to step one and repeat. This approach will help you deliver maximum value to your customers so that they continue to spend their hard-earned money purchasing your goods or services.
Interested in increasing the customer lifetime value of your audience base, but not sure you have sufficient resources to succeed? If this sounds familiar, you will benefit from partnering with Goodbay Technologies.
At Goodbay, we offer outsourced customer support services, business intelligence solutions, and growth strategy consulting specifically designed to help meet your revenue and growth milestones. Contact us today to learn more.