How to increase customer lifetime value (CLV) and boost company profits
While companies often spend a great deal of money and manpower on lead generation, it’s also important to remember that just as much effort needs to be poured into nurturing your existing customer base.
Taking a closer look at key customer lifetime value strategies
This is especially true if you are in the SaaS field, where customer retention is paramount of the success of a company’s business model, which is why it’s necessary to keep a careful eye on your customer lifetime value (CLV) and find ways to boost it wherever possible.
Reining in new customers is often more expensive and time-consuming than the energy it takes to keep your existing ones happy and loyal. You may end up signing a bunch of new contracts, but you could end up losing quite a few existing customers in the meantime, which is not a winning strategy no matter what kind of economic climate the market’s currently facing.
Don’t forget to calculate CLV. If you fail to do this, you won’t be able to measure the next steps in your sales process.
There are essentially three core goals that subscription-based SaaS sales teams should incorporate into their business growth plans in order to increase CLV:
- Increase the amount customers spend on each individual order: This strategy looks at sales on the micro level — getting individual customers to spend more on each transaction in order to increase company profits.
- Increase the overall volume of sales transactions: This strategy looks at sales on the macro level — boosting the company’s overall sales volume in order to increase profits.
- Decrease costs associated with customer services: This strategy aims to cut customer service costs, without compromising quality, in an effort to increase profits. Think in terms of lowering costs associated with, for example, packaging and shipping of goods and services.
Now that you have a solid game plan, it’s time to put it in motion. There are a lot of ways you can go about doing this, but the most effective short-term tactics that lead to fast CLV growth involve building long-term relationships with your existing customer base. How do you achieve this quickly? Communication. Personalization. Re-engagement. Upsell.
Communicating with your customers on a regular basis will help establish lasting partnerships, leading to an increase in CLV. Whether you’re checking to see how they are enjoying a service, upselling a product or simply sending them a reminder that they failed to complete their transaction after filling their shopping cart, every interaction works toward developing brand loyalty.
Offering high-end customer support such as
- 24/7 customer support
- live chat support
- FAQs/knowledge base
will also help to boost the CLV and decrease churn.
Feedback is critical. It lets you know what’s going well and alerts you to areas that need improvement. Find out if you need to work on, for instance, perfecting your onboarding practices. A customer might need additional training to better understand how to use your product. Make it easy for your customers to get in touch with you via email, phone or online chat. And above all, don’t leave them hanging if they reach out with questions or concerns.
It’s important to start building relationships with potential customers from the beginning.
Personalize Your Message
Many sales reps use this approach to reel in new customers. It’s also a good way to connect with existing customers as well as increase CLV. With the amount of data that is accessible today, it is easy to personalize all aspects of customer outreach, from service upgrades to promotional deals. You can also tailor your email marketing to the specific needs of individual customers. A personalized message goes a long way in showing customers that you care about them and may result in lucrative business referrals.
Upselling a product or service to satisfied existing customers is a lot easier than signing new ones. Appeal to your customers’ needs and explain how they can benefit by adding an additional service or product to their order. Exclusive offers and deals are also effective at increasing transaction volumes and are good ways of rewarding loyal customers.
Segment Your Customer Lifetime Values
Are your sales campaigns attracting the right kind of customers — repeat users and potential long-term customers? Or are you seeing a lot of one-time buyers? Study your customer acquisition model to determine if there are any bottlenecks in the process. Maybe some of these one-time buyers are indeed part of your target group, but they need a bit more persuasion from you to land firmly in the long-term customer category. Breaking down your customer lifetime values will not only show where the biggest potential is but also how to use your budget most effectively.
- One-Time Customers: You are netting very little if any profit off these customers. Look for ways to increase revenue from these one-off buyers by increasing the average first-time sales volume.
- Repeat Customers: This group should make up the majority of your customer base. These are the customers who make at least two purchases. Your goal is to keep them coming back, while giving incentives to raise their average order value.
- Loyal Customers: You’ll make the most money from this group. You can bolster your loyal customer base through customer optimization. This may take the shape of feedback surveys, loyalty programs and limited-time offers and discounts.
Retargeting One-Time & Repeat Customer
All salespeople look for ways to turn their one-off buyers into repeat customers and repeat customers into loyal customers. Retarget these customers with products that will bring them back to your website. The goal of retargeting campaigns is to keep your brand fresh in your prospect’s mind, piquing their interest enough to explore what else you have to offer. This is a good way to increase your conversion rates and your average sales volumes.
- Re-engage with Past Customers: Re-engage with one-time customers or those who haven’t made a purchase in a few months. Just don’t write them off. If they have bought from you in the past, they could be enticed to buy again. You just need to reach out. Send them an email with an exclusive offer or discount on their next purchase. Remind them that they left their shopping cart lonely. Ultize personalized ads to target people who browsed your website but didn’t complete a transaction.
Having solid retention strategies and tried-and-tested tactics in place will undoubtedly increase CLV and make your annual profits soar. The ultimate goal is to get your customers to spend more. Few companies these days dedicate enough resources and funding to customer retention, giving you a competitive edge.
Bottom line: Keep your customers happy. They are your greatest asset.