Getting caught up in the thrill of making the initial sale can be accessible in the ever-evolving business landscape. But as any savvy entrepreneur knows, the real money is in repeat business. Enter the concept of Customer Lifetime Value (customer ltv), the holy grail of customer retention. The CLV measure is used to calculate how much money a client will bring in over the course of their relationship with a company by making purchases. And let's be honest, who doesn't want a customer for life? But how do you achieve this lofty goal in ltv marketing? In this article, we'll explore the strategies and tactics you can use to boost the lifetime value of a customer and turn one-time buyers into loyal, lifelong customers."
What Is Customer Lifetime Value?
Customer Lifetime Value (LTV) measures the value a customer will bring to a business over their lifetime. You can start customer lifetime value calculation by multiplying the average purchase value by the number of purchases per year and then multiplying the average customer lifespan. Customer ltv is a crucial metric for businesses because it helps them understand how much revenue they can expect to generate from a customer over time. It can also help them make better marketing, sales, and support plans.
For example, if a business has an average purchase value of $50, an average of 2 purchases per year, and an average customer lifespan of 3 years, the LTV for that customer would be $300. This client is worth $300 to the company because they will likely spend that much over the following three years.
LTV is an important metric for businesses because it helps them identify their most valuable customers and allocate resources accordingly. An example of a customer lifetime formula: if a company knows that a particular customer has a high LTV, it may invest more in marketing and sales efforts to retain that customer and increase its lifetime value. Moreover, customer ltv can be used to zero in on the customer subsets with tremendous expansion potential, thereby directing a company's acquisition and retention efforts where they will have the most significant impact.
It's important to remember that LTV is a predictive indicator; thus, it can shift over time based on customer actions, competitors' strength, market state, and the company's success.
How To Calculate Customer Lifetime Value
Customer lifetime value formula is calculated by multiplying the average purchase value by the number of purchases per year and then multiplying the average customer lifespan. For example, if a business has an average purchase value of $50, an average of 2 purchases per year, and an average customer lifespan of 3 years, the CLV for that customer would be $300. It means that in 3 years, the business can expect to generate $300 in revenue from that customer.
Why Is Customer Lifetime Value Significant For Your Business?
Customer lifetime value is essential for businesses because it helps them identify their most valuable customers and allocate resources accordingly. Suppose a company has determined that a specific client has a high customer lifetime value. In that case, it may raise its spending on marketing and sales to keep that customer around and grow its lifetime value. In fact, CLV can be used to zoom in on the most lucrative client subsets to acquire and keep as part of the firm.
CLV also aids organizations in figuring out how much their client subsets are worth to tailor their marketing efforts better and discover new avenues for revenue growth through upselling and cross-selling. In addition, CLV can be used to compare the value of various client retention methods and the efficiency of different advertising mediums.
Tips On How To Have A Better Customer Lifetime Value
1. Understanding the Customer Base
When it comes to understanding your customer base, it's more than just a one-size-fits-all approach. Different customers have different needs, wants, and spending habits. That's why segmenting your customer base based on CLV is a game-changer. When you understand your customers, you can identify your most valuable customers and tailor your marketing, sales, and customer service efforts to their specific needs.
It's like a choose-your-own-adventure book. If you don't section your customers, you'll be stuck on the "generic" path, leading to wasted resources and missed opportunities. But, if you put them in different categories, you can choose the path that leads to the most valuable customers and maximize their customer ltv.
Let's say you own a luxury clothing store. You can categorize your customer base into high-end, mid-range, and budget. You can focus on providing exclusive deals, personalized styling services, and special events by identifying and targeting high-end shoppers with a higher customer lifetime value. With budget shoppers, you can focus on providing them with discounts and sales.
Building your website with Strikingly can help in categorizing your customers. Set up a custom survey form to see where each customer fits in your categorizing strategy. Viewing the form responses is a breeze because you can filter form responses in your Audience list.
2. Customer Retention
Retaining existing customers is the ultimate cost-effective hack for any business. Getting a new customer can be multiple times more expensive than having an existing one. So, it's crucial to make an effort to keep your current customers happy and coming back for more.
It's a lot like dating. Would you rather go through the hassle and expense of constantly swiping and trying to impress new matches or focus on nurturing and maintaining a healthy relationship with a loyal partner? The answer is clear; retention is what you should choose.
One way to focus on customer retention is by providing excellent customer service. Being responsive and attentive to customer needs, resolving issues quickly and efficiently, and consistently exceeding customer expectations will create a loyal customer base.
Another way is by providing personalized experiences and tailored offers. Imagine receiving a personalized message on your birthday from your favorite clothing store, with a special offer just for you. Personalization can create a positive and memorable customer experience, which can lead to increased customer loyalty and repeat business. It can also make customers feel more valued, which can increase the likelihood of them making a purchase.
Focusing on customer retention can save money, increase customer loyalty, and ultimately drive more revenue. Hence, don't just focus on acquiring new customers; keep your current ones happy and watch your business thrive like a well-tended garden.
3. Maintain Quality
Image taken from Stirkingly
When it comes to customer service, you must pay attention to the quality. Providing excellent customer service is like a good first impression; it can make or break the relationship. Investing in customer service shows your customers that you care about their satisfaction and are committed to going the extra mile.
A dedicated customer service team is vital. It ensures that someone is always available to assist your customers and handle their concerns. But, more than having a team, you must ensure they are well-equipped with the right tools and training. Arming your customer service team with the tools they need to succeed is essential. Please provide them with resources like FAQs, scripts, and guidelines, as well as train them to handle challenging customers and complaints with finesse.
Investing in customer lifetime value also means investing in technology. Nowadays, customers expect to reach a business through multiple emails, phone, chat, and social media channels. Make sure you have the right tools to handle customer inquiries and complaints through these channels.
If you want to elevate your customer service game, look no further than our Live Chat feature, available with our Audience Plan or VIP Plan. Think of the Audience Plan as the cherry on top of your Pro or Limited sundae - it allows you to tailor the chat to your audience size.
Want the inside scoop? Learn more about the Audience Plan and how it enhances our Membership feature in this article.
4. Personalize your Marketing
Personalizing your marketing efforts is like writing a love letter. It shows that you put in the effort to make it unique and tailored for the recipient. By leveraging data and analytics to segment your customer base, you can create targeted marketing campaigns that speak directly to the interests and needs of your customers. A personalized marketing effort can increase customer engagement and loyalty and increase customer lifetime value.
Concerning customer lifetime value, Strikingly's newsletter feature could be used to determine the potential return on investment for email marketing campaigns targeting specific segments of customers. For example, suppose a business knows that a particular group of customers has a high customer ltv; they can choose to invest more in email campaigns targeting that group to maximize revenue. Additionally, monitoring the CLV of customers who sign up for the newsletter can help a business track the success of its email marketing efforts over time.
Image taken from Strikingly
5. Use Data and Analytics
Data and analytics are like GPS for your business; they help you navigate and make informed decisions. By leveraging data and analytics, you can better understand your customer's behavior, preferences, and pain points. The data gathered from analytics can be used to improve your products, services, and overall customer experience. Investing in the right tools and technologies to track and analyze customer data is crucial.
Image taken from Strikingly
6. Implement a Loyalty Program
Loyalty programs are like a VIP club; they make customers feel special and valued. Implementing a loyalty program can increase customer retention and encourage repeat purchases. Make sure you offer attractive rewards to your customers and easy to redeem.
7. Cross-sell and Upsell
Cross-selling and upselling are like a cherry on top of a sundae, they add value and make the experience even more enjoyable. By identifying opportunities to cross-sell and upsell, you can increase the value of each customer over time. This can be done by identifying complementary products or services that align with your customer's needs and interests, leading to higher CLV.
By personalizing your marketing, leveraging data and analytics, implementing a loyalty program, and cross-selling and upselling, you can increase customer engagement and loyalty, leading to higher CLV. Don't just settle for a one-size-fits-all approach; make it personal, use data, reward loyalty and add value to the customer experience; watch your CLV soar like a kite on a windy day.
8. Encourage Referrals
Referrals are like a seal of approval from a trusted friend. Happy customers often refer their friends and family to your business. Encourage your customers to refer others by offering incentives such as discounts or rewards.
Encouraging referrals is a powerful strategy for growing your business. Not only does it bring in new customers, but it also sends a message to your existing customers that they are valued and appreciated. When a customer refers a friend or family member to your business, they trust and believe in your products or services. This trust and belief, in turn, can lead to increased customer engagement and loyalty, which is beneficial for your business. Customers who refer others are also likely to be more satisfied with their own experiences and has a higher chance to continue doing business with you, thus increasing customer lifetime value.
Encouraging referrals is a win-win situation for both new and existing customers.
9. Monitor and Improve Customer Churn Rate
Customer churn rate is like a leaky bucket; it can drain your resources and revenue. Keeping track of your customer churn rate and identifying its reasons is crucial for improving CLV. Take steps to reduce churn by addressing the root causes, such as poor customer service or a lack of relevant product offerings. You can manage churn rates by surveying customers who have churned, analyzing customer data, and implementing strategies to improve retention.
10. Continuously Gather and Analyze Feedback
Feedback is like a mirror; it shows you what you need to improve. Gather feedback from your customers regularly and analyze it to identify areas where you can improve.
Gathering customer feedback is an opportunity to stay on top of their needs and improve the overall experience. You can adjust your products or services by actively seeking input and boosting customer satisfaction, increasing loyalty, and higher customer lifetime value (CLV). Also, monitoring and reducing customer churn and encouraging referrals can further enhance engagement and CLV. Remember, happy customers are loyal customers, and loyal customers are valuable customers. So, don't wait for feedback - actively seek it out, listen and act on it, and watch your Customer ltv fly.
Customer lifetime value is a powerful metric that can help businesses understand the value of their customers over the entire course of their relationship. Companies can increase customer ltv and improve their pipeline by monitoring and improving customer engagement and loyalty, reducing customer churn rate, and encouraging referrals.
And by continuously gathering and analyzing customer feedback, businesses can stay ahead of customer needs and make the necessary adjustments to improve the customer experience. Customer lifetime value is a crucial metric to measure the performance of a business, and by utilizing it, companies can make data-driven decisions to improve their bottom line. Businesses must focus on customer lifetime value to build long-term customer relationships, increase customer satisfaction, and boost sales.
Image taken from Strikingly
Incorporating personalization into your customer interactions can be a powerful tool in creating positive and memorable experiences, which can lead to increased customer loyalty and repeat business. As a partner in customer lifetime value, Strikingly can help you to personalize your customer interactions, through its platform which gives you the tools you need to create customized and engaging online experiences for your customers.
