Customer lifetime value, often referred to as CLV, is one of the most important measures of marketing success. Strong CLV represents loyalty and customer value. It’s an essential way to measure the success and strength of your business.
CLV is one of the ways successful online businesses like Amazon measure performance. They aren’t just looking to attract or retain customers—they also seek to maximize the value of customers over time. Offline businesses can also calculate CLV and use it effectively for planning.
Here are five practical ways you can maximize your CLV and improve your bottom line.
Measure and manage CLV
You can’t manage it if you don’t measure it. Accuracy should be the goal, but don’t let the desire for surgical precision prevent you from working with what you have. The measures required for the calculation, as we’ve seen, can be very simple. If you’re not collecting the data you need, now is the time to start.
Among the most important information is: customer contact and profile information such as demographics, lead source (how they found you), customer experience data like satisfaction or Net Promoter Score, visit and purchase history. With these data pieces in place, you can get extremely targeted results.
Target your best customers
Acquiring new customers is 6-7x more expensive than it is to retain them. Many businesses spend hundreds just to earn the opportunity to win someone over. But prospects aren’t all the same. You don’t want to spend the same amount on a prospect who is likely to churn as a prospect who is likely to become loyal. So how do you decide? The answer is often in the data.
This is one of the most valuable ways CLV can help you make wise marketing investments. By clustering your customers by CLV and looking for common characteristics among your highest value segments, you discover clues that will help you target your best potential customers, and make big improvements in the performance of your ad spending.
Manage customer experience
The best way to bring customers back is to give them a great experience. You don’t want to leave this to chance, so ask your customers how you’re doing. Solicit their feedback and advice. Learn what you did right from happy customers, and what you could improve in the future from the unhappy ones.
Take immediate action when things go wrong. Customers that start with a bad experience can actually become more loyal than customers who had a good experience if you handle it well. Feedback forms, satisfaction surveys and paying attention to reviews and social media are all good ways to do this.
Line up communication with loyalty
Asking someone for a first date is different from a marriage proposal. Likewise, it doesn’t make sense to talk to loyal customers the same way you talk to first-time prospects. Many businesses use deep discounts and promotions to attract business. But blanketing your customer list with these kinds of offers is missing an opportunity to align offers with loyalty segments.
Introductory offers are a good way to attract new business. But your loyal customers may be more interested in a special event or perq available only to them. It’s important to track customer loyalty so you can treat your best customers like royalty and keep them coming back. It also helps to know if your offers are attracting repeat visits. If not, try something new.
Nurture employee relationships
One of the most effective ways to keep customers coming back is to treat your employees well. Employees typically become more effective the longer they’re in the job. And a stable team can build lasting relationships with your customers.
Friendly faces offering good service provide incentive for people to come back to your business. So look for ways to build trusting relationships with your employees, and nurture their growth.
CLV state of mind
As a measure of success, it’s hard to beat CLV. It offers a unique, long-term way to think about your customers and your strategy for maximizing profit. Thinking beyond customer acquisition will help you stay focused on the customer experience.
Look for things that delight your customers and improve your business. Customer loyalty is progressive and strengthens over time. Use CLV as a guiding metric and watch your business thrive.