Acquiring customers isn’t easy, especially in today’s multi-channel marketing landscape. You need to consider website SEO, paid traffic, email campaigns and content marketing, amongst other tactics, just to attract visitors to your website. Not to mention nurturing to push them along the journey from lead into a customer.
So what’s the best way to see a return out of the time, money and effort invested, into converting new customers? Experts agree that to get a better ROI on the acquisition, you need to increase customer lifetime value or CLV. In this post, we’ll look at what CLV is and how you can maximise it for your business.
What is CLV?
According to the marketing guru, Neil Patel customer lifetime value (CLV) is “the total amount of profit or revenue generated from a single customer over the lifespan of a business-to-consumer relationship”.
In other words, CLV is a prediction of your future relationship with customers and how much net profit you can attribute to them.
Sounds simple. But in order to make accurate CLV predictions, you must consider each customer individually, because how they interact with your brand, in turn, has an impact on their lifetime value. The probability of selling to an existing customer, for example, is much higher (60-70%) than to a new one (5-20%) – in marketing spiel, existing customers are your ‘low hanging fruit’.
And since it costs five times more to attract a new customer than it does to keep an existing one, focusing your efforts on retaining customers, with a higher lifetime value, will help your business to grow, faster.
Three ways to increase you CLV
With customer relationship management (CRM) and the customer experience becoming a large focus on business success, it will become important for you to understand how your efforts are returning value.
So let’s explore three strategies you can employ to increase CLV, and look at tactics for each, that you can action right away.
1. Increase sales per order
Motivating your customers to spend more money per transaction is easier said than done, right? But with some battle-tested strategies up your sleeve, a little can go a long way.
Although this tactic should be employed for each customer, it’s a fitting way to turn a new customer into a repeat customer.
- Personalised Upselling
Entrepreneur.com suggests showing related products that customers might be interested in when they view specific products on your website or add them to their online shopping carts.
If you need a refresh on the power of personalising your website to boost sales, ‘How to unlock the power of personalisation’ is a great example of this.
- Free shipping thresholds
Calculate your minimum order threshold – this is the magic number that sets the minimum amount to qualify for free shipping, as slightly above your current average order value. This will encourage your customer to spend a little bit more, in return for a shipping discount or free offer.
2. Increase sales over time
Rather than focusing on individual transactions, focus on the quality of the transactions over time. Here the focus is on moving existing customers (perhaps only one-time buyers) into repeat purchases.
- Loyalty programs and exclusive offers
Reward customers for their ongoing business show you care. Offer discount offers on birthdays and anniversaries to give them a reason to come back.
- Ease and speed
Make the checkout process smooth and seamless. Entrepreneur.com suggests ensuring your eCommerce store offers easy password and username retrieval, and offer to save shipping and payment information, so repeat customers don’t have to input that information next time.
- The finer details
What is your packaging and unboxing process like? Haven’t thought about it? Well, you really should. Use this experience to represent your brand, show you care and delight your customer.
3. Reduce costs to serve customers
The less you spend on serving your customers, the greater the value each customer holds for your business.
As we covered in our previous blog post; great customer service will transition repeat customers into loyal brand advocates.
- Utilise digital communication channels
The digital age is a wonderful thing. You no longer need to man a customer service hotline in order to keep your customers happy. Have a variety of communication options available that don’t involve time-consuming phone calls – consider chatbots to answer frequently asked questions.
- Automate your email marketing
For every $1 spent, email generates an average of $40 in return, so email is a powerful and cost-effective tool in your arsenal. Setting up an automated email sequence through software like Mailchimp and Autopilot means you can be nurturing and remarketing to your customers, to increase their lifetime value, without spending big bucks.
Most e-commerce businesses spend a lot of marketing time and money attracting new customers, and that should form a part of your overall plan. As we’ve seen, concentrating your efforts on what happens after the sale and not before, can propel the growth of your business forward.
Your first step should work out exactly who your best customers are and Neil Patel talks you through this process using google analytics here.
From there the goal is to turn a new customer, into an existing customer and then into a loyal brand advocate and as they move up the chain, their lifetime value to your business will dramatically increase.