Learning how to increase customer lifetime value is a critical part of successful small business planning. It helps leaders like you understand the impact of internal procedures and policies, as well as pinpoint where to invest in changes to boost retention and customer spending.
That’s why we’ve rounded up six need-to-know strategies that illustrate how to increase customer value for your business.
Before we explore how to increase CLV, let’s start with what “customer lifetime value” means.
Although you could calculate the LTV specific single buyer, the “customer” in CLV refers to either your average customer or the average customer within a specific cohort or segment. “Lifetime” is the span of time from the customer’s first purchase to their last purchase with you, and “value” is the total amount of money they spend over that span of time.
The reason why CLV is so important is that a long-term loyal customer spends more and costs you less. Consider that:
Some CLV enhancement strategies can also be labeled as Good Business Practices. However, understanding how to increase customer lifetime value includes knowing the specific positive effect of taking core practices to the next level.
Good customer service is frequently touted as the main reason for brand loyalty. While a customer-facing building, website, or signage can be as appealing and inviting as possible, getting one rude or disinterested person on the line after you navigate an 800-number phone tree can sour a customer experience for life.
To that end, your customer experience goals should include:
Plus, a satisfied customer who has a positive experience isn’t just likely to stick around—they’re also more likely to sing your praises to their neighbors.
Loyalty programs aren’t a new invention—they’ve been around since the 1800s with trading stamps. But today, they’re more popular than ever. Why?
Because they work. Consider:
Think about your customer preferences and expectations, industry norms, and return on investment before selecting a loyalty program type (or mixing and matching for a hybrid approach). Examples include:
Making your program effective is key, and 48% of consumers say they expect special treatment in exchange for being a loyal customer. To that end, best practices for loyalty programs include offering:
There are certain brands that people believe are making the world a better place—and these brands outpace stock market returns by 134%. Why?
When you can enlist customers as partners, members, or friends (thereby increasing their engagement with your brand), they’ll often choose your products over convenience or price breaks.
To see similar returns, consider:
A top strategy you’ll see when increasing customer lifetime value is retention efforts. That’s because:
Retention strategies and techniques start with a focus on communication, like:
Additionally, it’s helpful to provide:
Once you understand the basics of customer experience and engagement, loyalty programs, and retention techniques, it’s time to explore advanced methods for increasing CLV.
Clean and thorough customer data provides businesses of all sizes with clear direction on how to identify, build, and retain high-value customers and increase CLV.
Good data, however, means connecting all points of customer contact and action through a robust, cloud-based customer relationship management (CRM) system that’s accessible (and correctly used) by all departments.
Slicing and dicing your customer data is also the engine to acquire multiple models and levels of CLV reporting:
By analyzing data through the lenses of specific time periods, customer types, campaign engagement, and service interactions, you can clearly see the effects of different business choices and behaviors.
Many CLV improvement strategies focus on the customer lifetime half of the equation, ensuring customers stick around as long as possible. The other approach to lifting your CLV is to increase customer value.
This can be done by:
Upselling can be a tricky process—you don’t want a high-pressure approach to irritate your customer, potentially detracting from their brand affinity, but you do want to ensure you’re not leaving money on the table.
To strike this balance, consider upselling in the following instances:
Cross-selling, on the other hand, isn’t about replacing one product with another or adding directly related products but about offering a separate, additional sale for complementary or aligned products that are known to satisfy your customers’ needs.
Tips for effective cross-selling include:
You can evaluate the impact of your strategies by measuring customer lifetime value changes over time, particularly when you:
Learning how to increase customer value also includes understanding how to measure the strategies you apply.
Important KPIs (key performance indicators) that directly contribute to calculating CLV include:
You’ll also want to track and measure:
Plus, consider these KPIs around customer service and satisfaction that greatly impact CLV:
To track these metrics, you’ll ideally need a CRM plugged into software that provides customizable CLV reports and tracking, such as Kissmetrics or ChartMogul. You can also create CLV reports using Google Analytics, your CRM, or even a spreadsheet program.
By improving your customer experience, adding a customer loyalty program, increasing customer engagement, and employing proactive retention techniques, you can improve your customer lifespan. Not to mention, adding data analytics and cross- and up-selling practices can enhance your customer value to further boost your bottom line.
The effectiveness of these strategies is why Portland real estate agent Joe Kennedy cultivates relationships through Nextdoor—in turn, delivering excellent service.
If you’re interested in strengthening your customer lifespan and value, a Nextdoor Business Page can help. Connect with your customers through business posts and build trust using recommendations from members. Our comprehensive Nextdoor Ads Manager dashboard also makes it easy to set up and track Nextdoor ad campaigns with granular, effective targeting.
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