25 April 2014
As a business, you want to gain more customers. More customers mean more sales and revenue. But customer acquisition isn’t the only way to increase sales and revenue. There’s actually a way to make more without gaining a single new customer - increase your average customer lifetime value.
What is Customer Lifetime Value?
The customer lifetime value is a way to measure how much each customer means for your business. If you increase this value, either by selling more to that customer or retaining them as a long-term buyer, you gain more revenue over the long haul. And when it comes to retention, building relationships raises your average customer lifetime value. According to a report by SumAll, up to 40% of total revenues from the businesses studied came from returning customers.
With that in mind, here are 3 ways to increase your customer lifetime value:
1. Upselling and Cross-selling.
Upselling is when you sell a higher-priced product that represents a higher value for the customer. Cross-selling is when you sell customers complementary products. Both upselling and cross-selling are excellent tactics for raising customer lifetime value. The math should be pretty easy. If a customer buys more expensive products or just simply buys more products in a single transaction, then that increases the amount of revenue you get from that one person.
Fortunately, online technology makes upselling and cross-selling easier than it ever has been. Recommendation engines analyze customer behavior in real-time and also mine past data in order to present your customer with options as they shop or browse your site. Recommendations are then made in the form of similar products (for upselling) and related products (for cross-selling). The philosophy breaks down as simply as this: “If your customer buys a bike, offer them a helmet.”
2. Build a Community.
Another way to raise customer lifetime value is to keep your customers engaged with your brand. If they visit your website or eCommerce shop often, then they’re engaged and are more likely to become buyers again. Make the sale, but keep your customers active with your site.
Blogs are a great starting point for a community. Blog writing shows off your expertise on a given subject while simultaneously letting your customers interact with each other and with you in the comments section. The give-and-take of blogging builds trust in your brand and keeps customers invested. Of course, a blog needs to be regularly updated, or it might become a ghost town.
Forums also provide a sense of community among members. Customers stay engaged in forums when they discuss your products and even help each other troubleshoot. Webinars, also, let you engage directly with your customers in a live format. The ultimate goal for community is engagement. And engagement leads to customer retention. And the longer the customer stays with your company, the more value they are likely to generate.
3. Improve Customer Experience
When it comes to customer retention, it should come as no surprise that website visitors and eCommerce shoppers have no desire to return to a website where they had a miserable experience. In fact, according to Forrester, customer experience is more important to brand loyalty than even the price of the products sold. But how to you improve the customer experience to increase your customer lifetime value?
First, look at the usability of your site. If your site is difficult to navigate, customers won’t want to come back a second time. Is your navigation clear? Does your design and site structure make sense to the user? Do you offer an in-site search option? All of these help customers find exactly what they want with minimal hassle. Another important factor of usability is mobility. If your site is not responsive for mobile devices, then you’re giving a poor experience to any customer that prefers to browse on a smartphone or tablet.
Second, after checking how functional your site is, then check how good your site is. Are you offering engaging and relevant content to your customers? Product reviews are a big hit and are known to raise conversion rates. Images and videos are visual content that work to put your company and products in the best light. Customers also appreciate personalization. A personalized experience gives them the assurance that you understand their specific pain points.
Sell, Engage, Retain
The three tips offered in this blog boil down to the following three tactics: Sell, Engage, Retain. Upselling and cross-selling raise the average customer lifetime value by increasing the amount of revenue brought in by a single purchase. Communities engage customers and keep them active with your brand. And a relevant, quality customer experience keeps your customers always coming back for more. Combined, these tactics work to raise the value of the customers you already have. And they even work for the new customers you’re bound to get.