Unless you are selling a single product or service, it’s more than likely the case that customer lifetime value (CLV) will heavily impact your company performance. With advertising stops growing more competitive, the customer acquisition cost continues to rise and your company must focus on retention. This idea of retaining customers can be translated into several areas including increasing the length, profitability, and revenue conversion. This article will briefly explain the top three ways to increase CLV.
- Build an emotional bond with your customer
Delivering good quality is not necessarily a competitive strength in today’s economy. There are many other products and services competing for your business and developing relationships with your customers is the key method of retaining them. While other companies look to cut costs in customer service, you can give your customer the more personalized attention to increase the value received from them. Building an emotional bond with a customer is more likely to result in their increased retention, regardless of what other competitors are doing in the market.
A strong emotional bond with customers will persuade them to use your company for reasons aside from simple material gain. The business relationship becomes a friendship that helps your company to withstand poor economic times by becoming a core budget line for your customer. Companies heavily invest in these activities by optimizing their websites and restructuring their call centers. The actual method in which you build this relationship is not important, so long as its implementation costs less than the value acquired from retention.
- Seek out potential cross-selling opportunities
Cross selling is the process of selling different products to the same customer, which may take place if you cross sell tennis balls to players that recently purchased a racket. This is often an overlooked area, because many companies are focused on their core competency and do not want to implement new product lines. Simple affiliate relationships are ways that your company can introduce new product lines without disrupting your existing supply chain. The cross selling opportunities that your company engages in, will shape how people perceive your company.
You should consider how each cross selling opportunity will impact your business as a whole. Adding some new product lines may impact how your customers perceive your business. For instance, if you cross-sell an item that is unrelated, it may cloud customers’ perception of you. The cross selling opportunities should be synergistic with your existing product line and genuinely desired by your customer base.
- Discover ways to reduce customer retention cost
There are several ways that your company may reduce retention cost, but doing so sacrifices the retention rates. For instance, you may avoid sending an e-mail newsletter to save from account management fees. Hiring an e-mail management team is expensive and reducing it would lower the cost of managing customers. However, it could negatively impact the CLV and you could actually be losing money.
Find ways to reduce customer retention costs that are unnecessary, such as excessive communication or advertisements that are ineffective. Use metrics to understand what is effective, as eliminating expenses that are not contributing towards CLV is the fastest way to improve its value through cost reduction.
These techniques provide a high level overview on how to increase your customer lifetime value. Following them will still take a considerable amount of skills and resources in under to maximize the value from each client. Increasing the CLV should be an ongoing endeavor that teams never seize the pursuit of. It is the primary metric that will impact your company’s long term success and resiliency in challenging economic times.