5 strategies to optimize customer lifetime value
Chances are, you work very hard to earn the business of new customers. That makes sense as new customers mean growth. On the other hand acquiring customers isn’t cheap. New customers represent the dollars you sink into marketing and advertising efforts, as well as product development.
The good news is that the longer you can keep customers around, and the more they purchase your products, the more revenue they drive. This increases their lifetime value to you. The following Five strategies will help you to optimize customer lifetime value.
Personalize The Customer Experience
How valuable is personalization? In the case of Adresseavisen, a medium sized newspaper, adding a widget to customize newsfeeds based upon preferences and behaviors resulted in an increased click thru rate of 4%. Amazon is, of course, famous for curating product recommendations to customers based upon past purchases as well.
How do you do this? First, collect data on customer purchase history. Use this information to reach out to them with personalized email. Curate their experience on your website based on their preferences. Provide customer support reps access to key customer information so that they can provide the best, most personalized service.
Create a Rewards or Loyalty Program
Walgreen’s has accomplished two things with their balanced rewards programs. First, they have increased likelihood of participation by making joining the program mandatory in order for customers to qualify for sales and special offers. They’ve also increased loyalty by providing customers with a variety of ways to earn points that can lead to cash rewards. Walgreen’s customers can earn points by making purchases, monitoring their health, or engaging in physical activity. This keeps customers engaged both in the store and online.
The concept behind a loyalty program is pretty simple. Give customers the promise of something free or other perk in return for their repeat business. Depending on your needs and willingness to invest. A loyalty program can be as simple as a punch card, or as complex as one like Walgreen’s.
Always Prioritize Relationship Building
A great customer contact management solution does more than store names, phone numbers, and email address It is much more than a repository for names, phone numbers, and email addresses. Instead, it should be a valuable clearinghouse of useful customer data that can be used to build personalized relationships.
Customer relationship building may seem a bit touchy feely, and it can be difficult to quantify the financial benefits of it. However, prioritizing customer relationships has a major impact on customer lifetime value. Remember that 68% of customers who stop bringing you their business do so because they believe you don’t care about them.
Focus on The Customer Journey
Too many brands make the mistake of only working to impress customers during the transaction phase of customer engagement. This is a shame, because there are so many opportunities outside of that to provide amazing customer service, and remind customers why they have chosen your brand over others.
Consider implementing customer journey mapping. This is a process that allows you to lay out a map of all of the potential steps a customer might take as they get to know your brand, and consider buying your products and services. This will include any potential points of contact. Some of these are:
- Visits to your website product pages or landing pages
- Chatting with customer service online
- Browsing in your brick and mortar location
- Reading reviews about your products
- Visiting your social media sites
- Sending you feedback
By mapping the journey, you can identify opportunities to serve existing customers better as well improving places where there may be an undesirable amount of friction.
Use Technology to Improve Engagement
Smart brands are employing technology in new ways to improve customer retention and increase sales. Customized apps can ensure that your brand is in near constant view of your most loyal customers. You can also use AI driven chatbots to improve customer service. If you’ve considered this before, and were less than impressed, check this solution out again. Bots are becoming smarter and smarter, and many can now interact with customers in natural, conversational tones. Even better, they are now better able to recognize when a real human being should take over an interaction.
Finally, consider using messaging apps such as Facebook to create customized engagement opportunities with your most loyal customers. There you can provide customer service and push notifications about products and special offers.
If you’re still not convinced of the importance of customer retention, keep in mind that you are between 60 to 70% likely to sell to an existing customer. This number goes down as low as 5% if you are working to acquire a new customer. By employing the five strategies here, you increase your chances of getting customers to stick around long term. This means more sales over time, and increased lifetime value.