How to Increase Your Customer Lifetime Value (CLV)
You know how the best time to get a job is when you have a job? Well, the best time to get new business is when you already have business. You can grow your bottom line in two ways: Acquiring new clients, or retaining the clients you already have and increasing their customer lifetime value (or CLV), which is the amount of revenue that you’ll earn off a consumer in the period that they’re using your service or product. Calculating this metric can get complex, but a simple scenario might run like this:
Imagine that you’re a paper-shredding service that cleans out veritable garbage cans full of old documents for a law firm that pays you $100 a month. You’ve been working with said law firm for a year now. Ergo, this customer’s lifetime value is $1,200. If you continue working with them, their CLV only goes up. Some studies have even found that a 5% uptick in retention can increase profits up to 95%, which is one reason that boosting your CLV is a more effective strategy in turning on the spigot of revenue than always being on the hunt for new business. So here are a few tips on how to extend your portfolio’s CLV.
Perfect the Process of Client and Customer Onboarding
Your employees need to be onboarded to understand the parameters of their roles, where to access the server, how everyone takes the fish-in-the-microwave policy seriously no matter where you go. The same process of providing clarification applies to your clients, as well. Even in the top-of-the-funnel stages, take the opportunity to wow your prospective customers with tutorials, leave-behinds, how-to videos, and walkthrough guides that communicate what you do and why your product is worth their money.
Personalizing all of that collateral to the needs of your user personas can help your sales team ace this vital first-impressions moment and ward off the scourge of customer churn. Plus, open communication helps people on both sides of the contract. Research indicates that 8 out of 10 consumers will pay more for a better customer experience, while businesses that know their customers’ motivations and interests can craft digital marketing messages tailored to them, develop precise upselling and cross-selling tactics, and — what often follows — deliver higher ecommerce conversions and a stronger ROI. Which makes sense: Customers who feel courted from the outset are more likely to seek your services for the long-term.
Stay in Touch with Your Customers
All that presale work you’ve done to charm your clients may not result in a sale unless you stay in touch with them. Keep in mind, though, the follow-up is a fine art: You want to pique people’s interest, but you don’t want to bug them. A careful email marketing strategy may be your solution, since it’s one of the most effective ways to maintain your customers’ attention — so long as those emails are worth the read.
So communicate the benefits of your product or service in a way that doesn’t feel like a one-size-fits-all promotion. Let people know you’re here to help. Send them a birthday hello. You’ve already segmented off your user personas, now be prepared for those personas to change. And when they do, the tone of your messaging should change right along with them — that is, if you want to maintain a relationship with them for the long term.
Switch to an Annual Billing Cycle
One of the foundational questions that any business must ask itself is how to price their services. An equally weighty question is how to bill those services. Those questions overlap, but they’re not exactly the same. Let’s go back to those attorneys who paid you $1,200 for a year of paper-shredding. Whether they fork over the whole amount upfront or $100 on the first of every month hardly matters, right? Wrong. A lump sum of cash allows businesses to forecast revenue, reinvest in operations, and do away with those awkward check-ins meant to chivvy customers across the renewal deadline.
With that said, few of us enjoy handing over a bullfrog of bills to anyone. So incentivize the switch to a yearly payment with a discount — 10–20% off, or a few months of free usage — and talk up the perks of a subscription model (instant access to new product features, multi-tiered offerings tailored to what the customer wants). Annual billing may seem like a lot to ask for, but if you establish a fee structure with a longer lifespan that benefits both merchant and client, you’re almost automatically extending your portfolio’s CLV.
Embrace Upselling and Cross-Selling Tactics
Upselling is the strategy of bumping up the price of a service or a product — a barista asking if you’d like an extra pump of caramel in your latte for $0.30 more, for instance. Cross-selling is offering services or products that complement something that a customer has already bought. Let’s say that you order a hanging planter off Amazon for your newborn’s nursery. Once you’ve filled up your virtual shopping cart, Amazon will cross-sell you with other items related to your purchase. (Wait a minute now, don’t you want a self-watering midcentury bamboo stand to go along with that hanging planter?)
Bundling products, or offering temporary upgrades and free shipping, also help boost revenue. And those tactics can be as beneficial for the company as they are for the customer, since sometimes you need someone to say “Do you need a bike lock?” when you buy a new bike. Just keep your recommendations to a tasteful minimum. Asking customers if they need a new bike lock is one thing. Pressuring them to buy tires and a helmet and a cycling bodysuit may overwhelm them — and cause them to abandon the transaction altogether.
Up Your Prices
Ever hear the old saw about the accountant who audits a business’ books and tells the owner, “I suggest you double your prices”? The owner says, “I can’t do that — I’d lose half my clients.” To which the accountant says: “Then I insist you double your prices.”
We’re not (necessarily) suggesting that you double your prices, but you do need to give yourself a raise as your company matures. Businesses, like professionals, tend to undersell themselves when they start out. As your operations scale up, however — offering new product options, adding more sophisticated clients, shoring up your clients’ bottom lines — you should reexamine how much you’re charging.
Now, a few things: You gotta earn your raise. (Don’t make your services more expensive if those services aren’t adding value for your consumers.) And let’s say you’ve got an old customer who took a chance on you when you had nada in your portfolio. Maybe don’t stun them with a gargantuan fee hike. Instead, build your pricing models to be flexible: Give them a downgraded service plan at their current price with the option of upgrading for a higher fee. Karma doesn’t always factor into business, but when tinkering around with your prices, you should also keep in mind the old saw about burning bridges.
Listen and Learn
The key to nurturing lasting customer relationships may be to view yourself as a partner to your clients rather than a salesperson who’s got to close a deal, because the least glamorous aspect of a digital marketing strategy may be its most vital part: Listening to your audience.
Send out surveys to gauge their responses on how to improve your business. Compile the good feedback with the bad, and sift through it for recurring issues. Granted, this means that you’ll be paddling against streams of criticism for the rest of your career. But what you’ll learn from that criticism will help you solve your customers’ problems, which will likely improve their satisfaction, and which, in turn, tends to do wonders for your profitability in the long-term.