What are the two biggest challenges that customer success teams are facing? It is to multiply consumer profiles and increase customer lifetime value (CLTV, CLV, or LTV). Indeed, for many marketers, expanding CLTV is their number-one priority since it helps build long-term relationships and boost revenue.
When you think about it, how do you foster stable consumer loyalty? It is by prioritizing buyer relationships above all else to increase CLTV and retention for your business growth. Thus, an expanded customer lifetime value is essential for your brand success. According to research, 98% of marketers believe that monitoring customer lifetime value is vital to their marketing strategy.
Source material: Criteo
Also, over 80% of respondents say that tracking CLTV helps them to increase sales. However, almost 70% of marketers said they need to do better in monitoring customer accounts. But why are these marketers concerned about tracking customer lifetime value? Because it helps them identify areas of improvement for increasing CLTV.
However, the big questions are:
- What is CLTV?
- Why is CLTV important to your business?
- How can you improve CLTV for more ROI?
This article will address those in a moment. So let’s move forward, shall we?
What Is Customer Lifetime Value (CLTV)?
Customer lifetime value definition: It is the entire worth of a customer to your business throughout his or her relationship with your brand. In other words, CLTV is the net profit or monetary value your organization makes from a customer over time.
It considers the following metrics:
- The ratio of consumer spending
- The rate of order occurrences
- Marketing costs
- Sales subtraction, and other measurables while serving customers
Understanding these metrics and tracking them is vital to help you define your most valued clients to generate more revenue. For example, I have a monthly G-suite plan with Google for my business email that has run for a year and a half.
Now, if you calculate a $5 monthly subscription, for instance, and you multiply that by 24 months, it equates to $120. That’s the amount of time I’ve been on the Google G-suite subscription – but that would increase over time as I make more payments.
Why Is Increasing Customer Lifetime Value So Important?
There are several justifications for why increasing your CLTV is vital to your business. One reason is that it costs much less to retain an existing customer than to acquire a new one. Indeed, 70% of surveyed marketers agreed to this fact. That is, according to Invesp.
Source graphic: Invesp
Also, increasing CLTV is crucial because it is more profitable to sell to an existing buyer than a new client. The percentage differs significantly, with a 60%–70% profitability for selling to a current buyer. In contrast, you may have a mere 5%–20% return for marketing to a new customer.
Besides the above, the study also revealed some exciting findings. It points out that current customers are 50% more likely to try new products, and they would spend over 30% more money. That is in stark contrast to new consumers.
Source image: Invesp.
So, increasing CLV is so critical as it enables you to retain existing customers. Given this, be sure to create a marketing plan that includes a strategy for increasing CLTV. If it means putting money into this marketing strategy by allocating part of your marketing budget, it will help you retain current buyers.
5 Ways How to Increase Customer Lifetime Value
Now that you know what CLTV represents and why it is essential for your business growth, we will look at the top marketing growth hacks for increasing your CLTV. Below are the top five ways that help you extend CLV and increase your ROI.
1. Prioritize Product Quality
One of the top reasons that consumers stick to your brand is quality. And if you continue giving and adding to your product quality, you will surely increase your customers’ lifetime value. The reason I switched web hosting services is that I was not getting worth from the former. But since my new web hosting provider is giving me more value, I decided to extend my contract.
That is the power of quality in marketing. It applies to any products or services you are offering. So it is logical to say that if you prioritize product or service quality, it will reduce churn. Also, existing customers will stay with your brand and become advocates. They will help spread the word to attract more clients and increase their lifetime value.
2. Improve Consumer Onboarding Experience
An insightful onboarding system is the hallmark of an optimal user experience (UX). And you can achieve that if your product has an intelligent user interface. Concerning consumer success and lifetime extension, an improved user onboarding experience is a vital element that ensures continued business growth. Why? Because a flawed onboarding system increases customer churn.
Indeed, research shows that it is among the top three main causes of customer churn:
- Poor onboarding experience
- Weak or feeble relationship building (your business will thrive on relationship building)
- Inadequate customer service
Note that it is at the user onboarding stage that you make the most positive impact. That’s because onboarding is where consumers interact with your products. Therefore, onboarding is a critical component of the consumer journey from the first touchpoint to conversion. Why is that so? Because your onboarding procedure enables first-time users to see your product or service’s value.
For instance, a report by Dan Wolchonok reveals the reasons why consumers fail to extend their lifetime value after week one of using your product.
Source graphic: HubSpot/SaaSFestPreso-Dan
The report shows that 30% of users stopped using your product because they didn’t understand it. But marketers who improved the user onboarding experience saw a 75% increase in customer retention in just the first week.
Hence, it is essential to improve the user onboarding experience to encourage existing users to stick with your products or services. Simultaneously, an improved onboarding process will compel new clients to come back – and extend their lifetime value with your brand.
3. Engage Customers With Value-Added Content
How do you encourage users to keep coming back, particularly when they’re not ready to buy? It’s by providing value through content. This is usually the case with first-time visitors – they visit your blog or website to satisfy an immediate need. In other words, they’re not prepared to purchase your offerings or commit to a long-term relationship.
Hence, you want to stimulate their desire to return to your site, stay longer, and possibly make a purchase. Therefore, creating relevant content types that entertain your audience and add value is one of the best ways to bring them back to your website.
For this, your posts will not be one-size-fits-all but would differ, such as:
- Product reviews
- Educational pieces (based on user needs)
- Product description
- Step-by-step guide
- Emotional decision materials
- Purchasing
- Onboarding content
- Loyalty focused content
- Advocacy content pieces and more
Moreover, when writing any of the above blog post types, ensure that you describe your product or service well, and be concise. Use illustrative materials to create more explanatory blog posts that are easy to understand, and that leave a lasting impression on the reader. In that way, you will compel him to return to your site. If you’re writing a product description for instance, it should provide readers with compelling details and features of your product or services.
Your content should also highlight user issues and how it will solve them, including other benefits of using your services. The more you nurture your audience with helpful content pieces, the more it helps attract new customers – while extending existing users’ lifetimes.
*Important* All users have varying needs. Consequently, create and distribute content in formats that align with their specific needs.
4. Reward Loyal Customers With an Upgrade
How do you make loyal customers happy? One way is to offer them an upgrade. Upgrading their services shows that you care about their interests and value your relationship with them. For example, if you provide a subscription service, upgrade your active customers to premium. Search for those who are actively engaging with your brand and offer them free premium service.
Yes, you’re not adding to your income, but the result is that those you upgraded will become advocates, using word of mouth (WOM) across marketing channels to tell others about your business. In this way, you increase your customer lifetime value and attract new leads – and convert them into paying customers.
5. Offer Outstanding Customer Service
Is customer service important to your business? Yes it is because the core factor to your business success is to draw clients to your enterprise and make them buy. The more people you drive in, the better your odds of increasing your income. But the challenge is how to get first-time buyers to make more purchases or orders.
One of the main drivers that bring first-time users back to make repeat purchases is excellent customer service. Given this, customer service, also known as client support and consumer service, should be part of your marketing mix since it enables you to make customers return for more purchases. Moreover, it is a marketing tool that allows you to build lasting brand/customer relationships through emotional connections. Besides, it provides a competitive advantage.
Please consider the following statistics to help inspire your marketing strategy:
- According to Trustpilot, 90% of US shoppers say customer service is their deciding factor for doing business with a brand.
- Research by HubSpot also revealed that more than 90% of buyers would make repeat purchases with a company that provides excellent customer service.
- Statistics by Groove indicate that US brands lost over $40 billion annually due to poor customer experience.
- Almost 90% of clients switched products because of poor customer care experience.
- 86% of customers will pay roughly 25% more for a better consumer service experience.
So the better your customer support service, the more you will increase CLTV. Clients will gladly engage with your brand and do business with you.
Wrap-Up
Increasing CLTV might seem challenging, but it is a rewarding marketing undertaking that will help you build your business on loyal customers. Like any other marketing asset, you must put in the effort to get results. Increasing your CLTV is not any different.
Therefore, apply the growth hacks above, test your strategy, and track results to see where to make improvements. Whatever tactics you’re using, ensure that you’re implementing best practices that signal your audience that you’re the best.
Did we miss anything? Your remarks are much appreciated!
