Calculating what a customer might be worth is alluring for managers and marketers alike. This clearly answers why customer lifetime value(CLV) is so popular in many industries. For the unacquainted, customer lifetime value represents the total amount of money a customer is expected to spend in your business, or on your products, during their lifetime. But why is this important for your business, you wonder? It helps you make decisions about how much money to invest in acquiring new customers and retaining existing ones. Also, it plays a significant role in building and maintaining customer loyalty in the long run. Research reveals that deepening connections and building strong relations with customers is the key to customer retention. So, while keeping existing customers happy and engaged is seemingly overwhelming, just how should a company increase their customer lifetime value? Here are four tips that will help you get there:
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Focus on Building Customer Loyalty
Leading brands provide their customer with consistent quality, outstanding customer service, and high value. Loyal customers will result in repeat sales and become the first to try your new products. The determinants of customer loyalty include superiority of products (or services), quality of customer service and subtle “shared values.” Several recent research have suggested that shared values are the primary reason for maintaining a brand relationship. Clearly communicating your brand philosophy – one that reflects your customers’ beliefs – is a sure shot way to impress your customers.
Understand your Customer
Companies might already be aware of who their existing customers are and what they purchase the most from them. The critical question here is whether the organization is tapping into the insights it may already have about these individuals to deliver the ultimate customer experience. Data analytics can prove to be an excellent tool for better understanding buyer behavior, customer shopping patterns, and product/service lifecycles. Companies operating online can also dig into the traffic of the website and identify the actions that can be taken to move the customers to better connect with the brand. Furthermore, this data can be used to work on giving customers more of what resonates with them and personalize communications to align and target customers. Doing so will enable brands to deliver an enhanced customer experience that will keep them in the corner over the long haul and improve customer lifetime value.
When a company increases the average deal size or the basket size by upselling and cross-selling to customers, it plays a vital role in improving customer lifetime value. Companies must look for and communicate ways to add more value to the product or services. However, brands must ensure that they offer honest, targeted information that will genuinely help. Unrelated or questionable recommendations could heavily damage the credibility of helpful, relevant offers.
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To improve the customer lifetime value, brands can create an incentive scheme that grabs (and holds) customers’ attention. This can be done by avoiding discounts and instead, offering exclusive products or value-added services. Studies show that discounts lead to reduced customer lifetime value and decreased perceived value, while free gifts maintain quality perceptions and increase the value of the deal. Companies must ensure that they effectively communicate the rewards program, and make the rewards attainable and complimentary to the products or services.