Studies show that a huge percentage of businesses spend more time and money finding new customers than keeping those they already have. Which, when you consider how much costlier acquiring new customers is than retaining existing ones, sounds like a massive mistake! To increase client lifetime value (CLV), you need to find ways to acquire customers inexpensively. You need to do this while also making sure that they stick around long enough for you to woo them.
This might seem like a huge challenge, but don’t fret! All it takes is an irresistible product, service, or program (which you already have) paired with an outstanding customer experience!
What Is Client Lifetime Value?
Have you ever wondered what the one business metric that hugely successful companies like Amazon use to drive profits is? It’s Customer Lifetime Value (CLV)!
To put it simply, client lifetime value (CLV) is a metric for understanding your customers. It predicts how much net profit your relationship with a client can bring to your business over a period of time. For example, suppose you run a subscription service where the average customer spends $100/year for two years. This means that your average CLV is $200. Easy peasy!
Rather than thinking about how you can acquire lots of new customers, CLV encourages you to think about optimizing your marketing initiatives and helps you design efficient strategies that won’t blow your budget. A high CLV means each client will bring in more revenue for your business. Since each client becomes more valuable, it means you can afford to spend more of your hard-earned cash finding new customers and retaining existing ones. A win-win!
How Can You Increase CLV?
Increasing your business’ client lifetime value (CLV) might be as easy as changing your billing cycle from monthly to yearly. Or as tricky as completely revamping your customer service and support procedures. The process may seem a little daunting at first. But believe me when I tell you, it is entirely worth it!
So how is it done? Take a look through some of my tried-and-tested strategies for increasing CLV and generating more income from existing clients below!
1. Improve Your Onboarding Process
First impressions matter, especially in business!
Inadequate onboarding is one of the primary causes of churn (the percentage of customers that stopped using your company’s product or service during a particular time frame) and is certainly an area you should be focusing on improving to achieve success and long-term business growth!
The onboarding process gives you a chance to really engage with your customer and is where you can have the most beneficial influence on their future choices.
Now, although your chosen process will depend on your business, customer demands, and future goals, there is one thing all successful onboarding processes have in common: they are QUICK and SUPER SIMPLE!
A smart, streamlined onboarding process is a key ingredient in getting new customers to come back for more. So, where do you begin? Start by incorporating walkthrough instructions, interactive tutorials, and any other information that can simplify the process for your customers (make sure to track your results!). It may take some trial and error, but eventually, you’ll discover a method that works for both you and your clients!
2. Upsell, Cross Sell & Then Upsell Some More
Upselling and cross-selling (related but not the same) are two of the simplest methods to increase your client lifetime value (CLV).
If you provide lots of complementary products or services, have several pricing levels, or charge depending on product consumption. Then this is definitely something to consider factoring into your marketing strategy!
The art of selling a more expensive version of a given product or service is known as upselling, while cross-selling is a technique used to encourage a customer to spend more by buying a product related to their initial purchase.
Here are some suggestions:
- Offer Bundles: Grouping different products or services together and selling them at a lower price than what they would have sold individually, such as Amazon’s “Frequently bought together” section, helps increase the value of customer purchases.
- Data-driven suggestions: Using a CRM Service like Active Campaign or Hubspot that allows you to look at a customer’s previous purchases or interactions with your website and sell additional products or services accordingly.
- Offer Free Shipping: Who can say no to free shipping? I know I can’t! Free shipping is a proven method to boost sales. By reminding your customers how much more they have to spend to qualify for free shipping, you’re providing them with a big incentive to continue adding items to their basket!
Tip: The more upsell and cross-sell opportunities you show clients, the higher the chances they’ll take one, so offer them everywhere you can!
3. Consider Switching to an Annual Billing Cycle
If you sell a recurring product, service, or program (for example, a subscription service), the total amount of time that a customer continues paying for it is one of the most important figures to consider when improving your CLV.
One easy way to improve CLV is to encourage an annual billing cycle (instead of monthly). By committing your clients to one whole year of your service, product, program, etc., you will increase your average CLV, which in turn can make forecasting future revenue easier.
Tip: Very few of your customers will extend their billing cycle unless you give them a reason to do so. One of my favorite ways to encourage clients to make the switch is to offer a discount, e.g., 10% off the total cost or one month free!
4. Seek feedback
CLV and customer experience are inextricably linked. If you want to improve CLV, you must improve the user experience. It’s really that simple!
Speaking with clients about their experiences of your business and opening yourself up to their criticisms can seem a little scary, but trust me, it’s a good thing! After all, if you want an unbiased view of the client experience, you’ve got to go straight to the source!
Asking your customers questions about the quality of your products, services, and customer support processes while promoting open feedback can lead to the discovery of unknown shortcomings within your business. This honest feedback will allow you to address any issues, improve customer experience, increase conversion, and reduce churn!
5. Provide Unbeatable Customer Service
Happy customers are loyal customers.
Did you know that around one-third of customers are likely to switch brands after experiencing just ONE incidence of lousy customer service? I don’t know about you, but that’s not a risk I’d like to take!
We all know from personal experience that the happier you are with a brand, the longer you stick with them. So, if you treat your clients poorly, ignore their efforts to reach out to you, or make them feel underappreciated, what do you think they’ll do? Chances are, they’ll leave. And you can’t blame them!
So how do you ensure that your customer service is functioning as it should be? One of my favorite methods is making sure I am active on as many social media platforms as possible. A huge number of customers use at least three different social media channels to contact support, and with the majority of these expecting a response within 24hours, it pays to keep an eye on them!
Remember, better customer service leads to better customer experiences, which as a result, leads to more committed clients!
So What Did We Learn?
- Improve Your Onboarding Process: First impressions matter! The onboarding process gives you a chance to really engage with your customer and is where you can have the most beneficial influence on their future choices, so make sure you get it right!
- Upsell & Cross-Sell Where Possible: Upselling and cross-selling are two of the simplest methods to increase your CLV. The more upsell and cross-sell opportunities you show clients, the higher the chances they’ll take one, so offer them everywhere you can!
- Consider Switching to an Annual Billing Cycle: Encouraging clients to commit to one whole year of your service, product, program, etc., is an easy way to improve your CLV.
- Seek feedback: CLV and customer experience are inextricably linked. If you want to improve CLV, you must improve the user experience using customer feedback. It’s really that simple!
- Provide Unbeatable Customer Service: Better customer service leads to better customer experiences, which as a result, leads to more committed clients!
The Bottom Line
The more you ask for and act on feedback, offer exactly what your customers need (even if they’re not aware they need it yet), and provide top-notch support, the more valued your clients will feel and the more your CLV will grow. It’s really that simple!
Need help? With over 20 years of knowledge in the digital marketing space, I can assist you in creating a customer experience that will keep your clients coming back for more! Schedule your free consultation with me today.
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