11 Tactics to Increase Customer Lifetime Value
11 Tactics to Increase Customer Lifetime Value
Building a successful empire—uh, we mean brand—requires two foundational strategies.
Firstly, it requires you to continually prospect and acquire new customers. Secondly, it requires you to increase the lifetime value of your customers through customer retention and revenue building tactics.
If you are just starting to develop your personal brand, you will need to focus your efforts primarily on prospecting new customers. When it comes to long term retention, however, data shows that customer retention and optimizing the lifetime value of your customers is critical in securing steady, predictable revenue (read: keeping you afloat financially and eventually turning your six-figure brand into a seven-figure brand).
To help you understand the importance of customer lifetime value (CLV) and boost your annual revenue, we’re providing you with expert optimization strategies (including some bonus ninja tactics). Because we like you.
What is Customer Lifetime Value (CLV)?
Customer lifetime value is a measurement tool that is critical to your marketing efforts and your revenue building strategy.
Rather than measuring customer value from a single transaction perspective, CLV measures how valuable a customer is to your business over an unlimited relationship period.
Very few business models only require one-time-only purchases. Depending on your personal brand strategy, you likely want to foster repeat purchases, cross-sells, upsells, and subscriptions that support annual recurring revenue.
CLV helps you to understand and optimize the cost of your average customer acquisition.
Fact: It will cost you less to keep an existing customer than to acquire a new one through marketing efforts. That means increasing your CLV will help widen that gap further, which can boost your overall revenue.
If, for example, you charge $2,000 for an average project, and it costs you $3,500 to acquire a new customer, then your expenses will outpace your earnings unless you can reduce your acquisition costs, increase your average CLV, or both.
Strategies to Increase CLV
Here are 11 strategies to help you increase your CLV, keep your balance sheets out of the red, and deepen your relationship with your customers over the long term.
#1. Create Detailed Buyer Personas
To increase customer lifetime value, you need to understand your customers—intimately.
To build that intimate understanding of your audience, create personas to help you target your ideal customer with compelling messaging and to ensure your company is meeting an evolving marketplace need.
By taking your personas to the next level with highly detailed demographic and psychographic insights, you can better understand what motivates your prospects to:
- Select a higher-priced offering
- Opt-in to an available offer
- Renew their annual subscription
- Consider a competitive offer
- Cancel their subscription
Use your personas to map your customer journey, identify critical decision-making touchpoints, and inform your marketing strategy.
How can one build detailed personas, you ask? The best way is to interview current customers, prospects, and your competitors’ customers. Create a short list of people to speak with and offer to buy them coffee or promise only to take up twenty minutes of their time by phone.
Use the access to foster a deep understanding of every facet of their customer journey, buying habits, and brand preferences.
Developing detailed personas will give you the insight you need to help increase customer lifetime value.
#2. Create a Kick A$$ Customer Onboarding Process
Whether you are selling software, building websites, consulting within your industry, or offering any other type of professional service, you unequivocally must have a failsafe process to successfully onboard and impress new customers.
Twenty-three percent of individuals will seek out a new service provider if the onboarding process disappoints. That’s significant! Make sure you nurture and inform your new client the moment they enter the gate.
The onboarding process is your customers’ first genuine interaction with you and your brand.
If you lack efficient product or software training, don’t offer accessible support, don’t offer clear information about what they just purchased, don’t follow up with requests timely, or fail to communicate everything the customer needs in order to effectively thrive in their relationship with you, then they won’t be likely to become a long-term customer.
Customer lifetime value develops and deepens in these preliminary moments.
Think about it: when was the last time you returned to a restaurant that disappointed you on your first visit?
You didn’t? Neither did we.
Exceptional onboarding and first impressions are critical in increasing the lifetime value of your customers.
#3. Move Customers to an Annual Billing Model
If you are in the software as a service (SaaS) space, recurring annual revenue is critical to increasing your customer lifetime value. Developing annual billing opportunities within your business can support your recurring annual revenue goal.
Annual subscriptions enable predictable revenue. On the contrary, one-time or monthly purchases will make it harder for you to recover your acquisition costs.
Build into your checkout pages an annual billing option for your customers. Motivate annual subscriptions by offering a ten percent (or more) discount, additional training or services, or reduced hosting fees.
The more customers you can move to a yearly billing model, the more it will benefit your customer lifetime value.
#4. Routinely Email Valuable Content to Customers
Email is not only a prospecting tool. It should be used to foster long-term relationships.
Ask customers to opt into a monthly or quarterly newsletter, or create a content calendar with a regular cadence of communication (how about that alliteration?)
Use the frequent (but not too frequent—you don’t want your emails to become white noise) touchpoints to:
- Announce new products, services, and feature releases.
- Announce awards, customer recognition, and speaking engagements.
- Share customer testimonials.
- Offer cross-sell and upsell opportunities.
- Offer training opportunities and tips for using your product or software.
- Ask customers to provide a testimonial, or rate your brand on social media.
- Take a survey about their experience with your brand.
- Showcase your value. For example, report how much money your risk management software has saved your client, or how many customer support tickets your online chatbot software helped them address during the past month.
- Provide educational content. No sales. Just added value.
There are endless ways to use email to increase revenue, showcase your value, gain insights, and increase your lifetime customer value.
#5. Engage Customers on Social Media
We just proved why email is more than a prospecting tool. The same goes for social media.
Over 40 percent of business-to-business (B2B) retailers say social media is one of their top three channels for acquiring new business customers.
One way to leverage social media is to provide a community space for your customers to interact with each other, while providing you with another touch point opportunity to educate, guide and mobilize them in strategic ways.
Create a dedicated group for customers on LinkedIn or a private customer Facebook page. Exclusive groups allow you to segment your messaging between prospects and customers, provide value with customer-focused content, and create a sense of community and customer appreciation that will help you build lasting relationships.
Click here for more insights on how to build a community around your brand. It’s time to deepen your relationship with your clients and leads.
#6. Personalize Your Customer Touchpoints
Relationship building is key to revenue building.
Nurture your customers every step of the way, and watch your customer lifetime value increase. Miss this, and you’ve missed a subtle, yet potent, catalyst for your revenue and customer relationship development.
Diversifying those touchpoints with your customers, and being intentional about frequency and depth of interaction, is key to this factor. Miss this, and you’ve missed a subtle, yet potent, catalyst for your revenue and customer relationship development.
Seventy-nine percent of customers expect a brand to prove that they care about them and their needs before they make a purchase.
You should also know that 77 percent of consumers have spent more money on, or recommended, a brand that has offered a personalized service or experience.
One way to build long-term relationships with your customers, and to increase personalization in your approach, is to prove to them that your brand represents more than a financial transaction.
You may be selling a service or solution that does not require you to meet your customer in person. However, thanks to advancements in marketing automation technology and customer databases, there is no excuse for failing to personalize customer interactions.
Even beyond addressing emails to your customer using their first name, you can leverage tools to customize every digital customer touchpoint.
Consider the following personalization tactics:
- Create segmented email campaigns that provide specific resources and tips about the service or solution your clients purchased, and deliver those emails in a time frame that matches their journey through your product or service.
- In your email copy, refer to the time frame of your relationship with your client. Here is an example of some personalized email copy that can help you obtain additional customer insights:
You have been enjoying AmazingSoftware for three months, and we’d love to know about your experience and learn how we can continue to evolve our software to serve your needs better. Would you be willing to complete a brief, five-question survey?
- Offer discounted rates on your checkout page for VIP customers, or a special renewal rate for customers who sign a new contract at least three months before their renewal deadline.
- Personalize in-app messages to motivate customers to opt-in to a higher subscription.
- Recommend an additional product or service based on purchase history. Ten to thirty percent of revenue comes from product recommendations. Further, product recommendations in business-to-business (B2B) sales can increase conversion rates by as much as 320 percent and improve the average number of items placed in an online shopping cart by more than 68 percent. That means you can increase your customer lifetime value just by suggesting more of your own products to your prospects. Here’s an example of how to expertly master recommendations: Offer customers who recently attended your three-day educational conference on financial investment strategies ten percent off a one-on-one personalized investment strategy consultation. Your customer will feel like you understand their needs, and you’ll get an upsell in the process.
- Bonus Ninja Tactic: Business.com determined that any upsell or cross-sell that amounts to more than 25 percent of your customer’s previous total purchase will be viewed unfavorably, so keep any promotional offers within that sweet spot.
#7. Use Remarketing to Convert One-Time Customers into Repeat Customers
Traditional remarketing strategies allow you to target individuals who reached your checkout page but did not convert with social and search ads to regain their attention and motivate them to complete a purchase.
The same technology and analytics principles can be used to turn one-time buyers into loyal customers.
Use your website analytics tools to identify customers who have only reached your checkout thank you page one time. Then, depending on your product and service offering, design a marketing campaign to motivate them to:
- Purchase an annual subscription.
- Subscribe to auto-renewals of products.
- Join a loyalty or membership club.
- Purchase the same product or service a second time.
- Renew their subscription with a higher tiered product or solution.
Smart, targeted remarketing tactics can help establish the value of your brand and increase customer lifetime value in the process.
#8. Build a Loyalty Program
There is a reason why frequent flyer programs are so popular. People appreciate being rewarded for their repeat business.
In the B2B and B2C e-commerce space, loyalty programs can be hugely impactful for increasing customer lifetime value.
Consider the following loyalty program tactics:
- Reward points for dollars that can be redeemed for product credit, bonus merchandise, or “free” products.
- Bonus Ninja Tactic: Don’t let points expire. Fifty-six percent of shoppers will abandon a transaction when they realize that their loyalty points expired and the purchase would cost cash money.
- Offer exclusive access to VIP customers. Consider a private meet-and-greet with you after your next speaking engagement, or early access to your latest software feature enhancements.
- Allow customers to leverage their loyalty status as a business certification. For example, if you offer marketing training, offer a gold-level certification for anyone who completes four of your classes. Provide badge icons that your customers can add to their website to promote their knowledge (and your brand).
Loyalty programs build customer retention, which boosts customer lifetime value. It’s that easy.
#9. Over Deliver on Customer Service
In an era where it feels like service at every level is struggling to meet expectations, by providing an exceptional service experience, you can distinguish your brand in the marketplace, differentiate yourself from your competitors, and build customer loyalty.
In fact, thirty percent of customers will switch brands if they are disappointed by their customer service experience, and 74 percent have cited excellent customer service as a reason to spend more money online.
Many customers will tell you that they will stay with a product that is not top-of-the-line if they feel they are getting the best possible customer service.
Don’t believe us? Ask your prospects where they stand on this during your persona interviews.
With exceptional customer service, your customers won’t want to leave you, which helps you increase customer lifetime value.
#10. Upsell Strategically
Upsell tactics that you haven’t carefully cultivated or strategized can turn some prospects away.
To upsell effectively, use these ninja tactics to offer the types of upsells that serve up value without coming across as too pushy or tone-deaf:
- Bundle Products and Services: For example, bundle your website design service with your software training at a discounted rate compared to the cost of purchasing both separately. The discount may be what motivates someone on the fence about adding training to invest in the additional cost.
- Showcase Popular or Related Products. This is the “You may also like” approach that e-commerce goliath Amazon does so well. Include a sidebar widget on your checkout page and make it easy for shoppers to add an additional, relevant, and popular item to their purchase with just one click.
- Offer a Limited-Time Upgrade: Limited time offers help create a sense of urgency that motivates buyers to take action. Allow a customer to upgrade to your platinum offer on a thirty-day trial basis. Once they see everything available to them for just a little bit more per month or per year, they won’t want to go back to the less robust offering.
- Offer Free Shipping Based on Purchase Threshold. We’ve all done it. You add one more product that you weren’t initially shopping for to earn free shipping. The tactic works for a reason. Thanks to Amazon, we are becoming a society of shoppers who bristle at having to pay for shipping costs. If we’re going to spend another nine dollars, we’d prefer to get another product for our money, not just cover shipping costs.
Strategic upselling can make your client feel like they are being rewarded for their business. They’re receiving core, diversified value from you.
Don’t underestimate the strategic upsell and cross-sell as a fundamental means of supporting your clients at the highest level. You’re not only deepening your relationship with your client, but you’re boosting your revenue and customer lifetime value in one fell swoop.
#11. Survey Your Customers
The best way to learn what you can do to retain a customer is to ask.
Yes, it’s that simple.
One way to engage your customers in this way is to offer them a digital survey solution to gain customer insights. Incentivize customers to complete your survey by offering a special offer, such as ten percent off their next purchase. Ask customers questions that will help you determine:
- Why they chose your brand
- If they feel your product or service is of value for the cost
- What would motivate their switch to a higher tiered product
- What would motivate them to migrate to an annual subscription model
- What would motivate them to make a repeat purchase
As far as survey best practices go, incorporate a mix of quantitative and qualitative questions to give you the most actionable data.
Bonus Ninja Tactic: A small number of surveys won’t give you enough conclusive data, so work hard to obtain as much feedback as possible. Remember that you are asking your customer to give you their time—the most limited and valued commodity any of us have to offer. By rewarding them for their time, you are more likely to cultivate a vast, diverse and valuable repository of insights.
No matter your industry or your business model, your loyal customers are your best customers. You should not only treat them with the highest possible customer service, but you should reward their loyalty with offers and tactics that will both enhance their relationship with your brand, and help you increase customer lifetime value.
By doing so, you can keep innovating, expanding, and building the types of offerings that your loyal customers want and need. This generates a reciprocally beneficial growth pattern for you and your clients.
For more advice on motivating prospects to become customers, click here for an in-depth guide to purchase persuasion tactics.