It’s not something you necessarily want to think about, I know. But for marketers, it is a highly important metric, and one that can help to improve business performance and drive customer loyalty.
You can find out more on how to measure it and the benefits of CLV in Econsultancy’s Understanding Customer Lifetime Value report, but in the meantime, let’s delve into how marketers might be able to increase the lifetime value of customers.
Understanding the customer
While a growing number of marketers are recognising the importance of measuring CLV, less than half of those surveyed in Econsultancy’s report said they are able to do so.
The main reason for this appears to be teams lacking the ability to understand customer behaviour. Respondents to Econsultancy’s survey cited this as a key challenge in building CLV. As stated in the report: “This is often due to companies not having a single view of the customer and key insights being missed.”
The more that companies can unite data sources, the better they can understand how a customer engages across marketing and sales channels. From there, companies will be in a better position to optimise strategy and build value.
Focus on the customer experience
There’s endless research to suggest that a good customer experience results in increased loyalty (which is evidently a contributing factor for CLV). According to a consumer study by Temkin Group, 86% of people who received a great customer experience were likely to repurchase from the same company, compared to just 13% of people received a poor customer experience.
How to improve CX is a large and lofty topic in itself, so perhaps then, this point should merely reiterate the importance of having a CX-focused strategy, whereby companies have a clear vision and set of principles relating to CX, which is integrated across teams and departments.
This is not easy, of course. Econsultancy’s survey found that the top organisational challenge when trying to increase CLV was poor systems and integration hindering customer experience. But by building a better CX strategy, organisations can work to overcome these challenges.
Deliver personalised communication
Personalisation is one of the main tactics used by companies looking to increase CLV. It’s understandable why it is such a big priority, as personalised interactions (where companies tailor communication to an individual’s needs and preferences) can increase satisfaction and overall loyalty.
There also tends to be a more direct and immediate benefit of personalisation – i.e. triggering customers to purchase in-the-moment.
A 2017 Salesforce study found a direct link between product recommendations and higher revenue. While recommendations resulted in just 7% of visits to an ecommerce site, these visits drove 24% of orders and 26% of revenue. Even better, 37% of shoppers that clicked a recommendation during their first visit returned again, compared to 19% of shoppers who didn’t come from a recommendation. This proves that personalisation can deliver immediate results as well as longer term.
Aligning with customer beliefs and morals
Customers today are looking for more from brands than a product or service. According to Harvard Business Review, 64% of survey respondents cite shared values as the primary reason they have a relationship with a brand, indicating the importance of corporate responsibility and an outward focus on social good.
TOM’s is a great example of a brand that attracts and retains customers on the basis of its philanthropy. Its ‘One for One’ promise means, from every purchase made, it gives shoes, sight, water, and safer birth services to people in need.
These shared values also do more than spur on an initial interest in brands too, with 94% of participants in Econsultancy’s Trust and Transparency report saying that they are likely to be loyal to a brand that offers complete transparency.
On the back of this knowledge, it’s worth considering how companies might be able to reinforce the values they share with their customers, and to offer them ways to get involved with related initiatives or show support of a particular cause.
Offer additional value
Alongside factors like social good, it’s wise for companies to think about how they can offer additional value to customers. Again, this could be through personalisation, which enables the customer to seamlessly re-enter the purchase funnel (rather than start again from their own volition), or other factors such as community management and support.
Loyalty schemes can also offer additional value – giving customers perks and rewards for their purchases – as well as helping to enhance brand advocacy. There’s no guarantee they work, however, and it all depends on the sector. For example, there tends to be a lot of churn for mobile and broadband companies, with customers signing up to receive the best deals (and then potentially leaving for another). As a result, longevity-based schemes – i.e. rewarding how long a customer has been with a company rather than money spent – can be more effective. Within fashion and lifestyle-based retail, data-driven schemes that offer personalisation also tend to offer greater value, instilling a sense of importance in customers.
Ultimately, finding ways to exceed customer expectations – whether through free returns, exclusive online content, or even personalised messages in packaging – can have a huge impact on whether a customer repeats a purchase in future.
Consider a subscription model
While broader tactics like improving CX to increase loyalty is an important part of CLV, other more conversion-focused strategies can also play a part. In order to increase revenue (both in the short and long term), for instance, a subscription model can be highly effective. It’s not right for all sectors, of course. FMCG brands are usually the most applicable, largely due to the customer’s ongoing need for products.
The benefit for customers of a subscription is often a discount (when compared to isolated purchases made multiple times) as well as ease and convenience. As a result, this alludes to a longer-term relationship with brands, which in turn increases the lifetime value overall.
On top of this, subscription models can instil more loyalty in customers, with the sense that they’re less likely to abandon or cut ties with a company than someone making one-off purchases.
If a subscription model is not viable, upselling or cross-selling opportunities can also be effective, e.g. offering customers a ‘first look’ or exclusive access to new products or deals.
Make CLV a strategic priority
Finally, a common theme highlighted in Econsultancy’s report is the benefits of getting staff on board. More specifically, in getting staff to view CLV in terms of the value of the customer – not as a sales metric.
This shift in mindset is important as, again, it drives organisations back to the customer experience, and makes it an integral part of the company culture.
While it’s also been suggested that CLV should have ownership (with buy-in from senior and C-suite employees), real and long-term success comes with collaboration across organisations.
Econsultancy’s Understanding Customer Lifetime Value report