What’s your definition of scalability? For most, it is increasing revenue and profits, and most businesses associate it with increased acquisition of new customers.
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There are two ways of growing your business:
1. by consistently acquiring new customers, and
2. by retaining existing customers and increasing their lifetime value.
While getting new people to join your brand is crucial, most business owners spend too much time acquiring new customers. It leaves them with no time and resources to focus on their existing clients and consumers, thus, decreasing the customer lifetime value.
In this article, we’ll dive into what is the customer lifetime value (CLV), and how you can increase it to boost profits for your business.
Increasing Customer Lifetime Value & Boost Profits
Customer Lifetime Value: An Overview
Customer lifetime value is defined as the total worth of a customer to a business over the entire period of their relationship. We all know it costs more for a business to acquire new customers than keeping existing ones; therefore, increasing CLV is an excellent way to drive business growth.
For instance, if the CLV of an average 2-star restaurant customer is $1,500, and the restaurant is spending more than $1,500 to acquire a new customer, it’s certainly losing money.
Why is CLV crucial for a business?
Knowing the customer lifetime value enables businesses to devise new customer acquisition and retention strategies while maintaining a consistent flow of profits.
Understanding the key drivers of CLV can be helpful if you have a multi-year relationship with a customer, such as a TV subscription or subscription-based SaaS product. It further helps you with identifying the early signs of attrition as well.
And you don’t need to hire analysts and facilitate complex calculations to leverage CLV, all you need is an understanding of the value a customer provides over their lifetime relationship.
How to increase customer lifetime value and boost profits?
So, you know that CLV provides an insight into the value of your customers, and increasing it can help you boost your profits and business performance. But, how can a brand improve its customer lifetime value? Here are a few actionable strategies to increase your brand’s CLV.
Prioritize Quality and Provide Value
If you have the best product and you keep on making it better, you’ll not lose customers. Above all strategies to increase customer lifetime value, product/service quality is paramount as it gives your customers a reason to stick to your brand. You might be offering the best customer service, but if your product is not good, your efforts will be all for naught.
You can also pair it with providing value-packed content to your customers. Email marketing is a powerful strategy to retain customers, but most businesses do it the wrong way. The best kinds of emails to send are those which emphasize the value of your product/service.
- If you provide SEO services, send a weekly or monthly report demonstrating how your services have improved their website rankings.
- If you offer a wearable device like FitBit, send them weekly emails stating how much calories the users have burned in the last week.
Each product or service offers value; the key is to establish effective communication to present your contribution to your customers.
Provide Best-In-Class Customer Service
70 percent of customers believe customer service is a crucial factor for sticking to a brand, and 67 percent of them agree on paying more for better customer experience. Needless to say, superior customer service will go a long way in growing your business and increasing customer lifetime value. If your service is substandard, your customers will drift to your competitors even if your product is exemplary. Moreover, more than 30 percent of consumers demonstrate willingness to switching brands due to poor customer service.
But how do you offer the best-quality customer service? Here are a few recommendations.
- Omni-Channel Support: Interact with them an assist their queries on multiple channels, including mail and social media
- 24/7 Support: Thanks to chatbots and autoresponders, you can provide round the clock support without having people assisting queries in the night.
- Live Chat Support: Provide live-chat support during the day, and make sure your support team is dedicated and well-trained.
- Stay Active on Social Media: 90 percent of consumers try to reach out to brands on social media. They do so because they expect a quick response, be it for support or leaving a complement. And, to engage customer engagement, be sure to stay active on social media and provide your consumers with a timely response.
Detect and Solve Their Problems
Take a step ahead from your actual product or service, and provide your customers with something that makes their lives easier. The idea is to consistently look into your customers’ feedback and identify the most commonly faced hurdles.
For instance, assume you provide a subscription-based music service, like Spotify. Keep a check of reviews on App Store and Play Store. Some of the common issues your consumers may face can be “long load time” or “reduced quality for downloaded music.” If you discover multiple issues, pair them into categories and prioritize them as per the demand. Then, take quick action to fix these problems and enjoy an enhanced customer experience and customer lifetime value.
Take Actionable Advice From Customers and Credit Them for It
Another great way to improve your offerings is by seeking advice directly from your customers. If you have a bunch of ideas in your head, create a poll and send it to your customers via email or social media. To increase engagement, always offer some kind of reward for participating in the survey.
And if you end up making a change based on customer feedback, be sure to credit them for coming up with the idea by giving them a shoutout on social media, or a temporary free membership. You can use tools like Crowdsignal, Survey Monkey, and Charts Ninja to create polls and surveys with ease.
Give Them an Upgrade
If some of your customers have been loyal to your brand and engaging with it on a regular basis, you can consider them giving the full experience for free. If you have a premium service or a product line they have not tried, offer them a free upgrade. The cost you will incur would be diminutive compared to the value it will add to the customer’s lives.
If you can’t offer lifetime upgrades for free, consider giving temporary upgrades. Giving 7-day or 14-day free access to your premium plan could be a great way to thank your customers for being loyal to your brand. Plus, some users might like what they get from the premium plan, and they may end up upgrading, thus, increasing the customer lifetime value.
Your customer lifetime value and how you increase it depends upon what you offer to your customers. The Holy Grail to increasing your CLV is to do something more than what most of your consumers expect. And, it’s no complicated task.
All you need to do is show them how much they mean to your business by solving their problems and offering them precisely what they need. They will return the favor by sticking longer with your brand, attracting more customers, and increasing your revenue.