Increase Your Customer Lifetime Value with These Tips
It costs money to make money. In the world of e-commerce, this means that it costs marketing dollars to bring in customers. Once they’re in, the focus turns on how to keep them; how to make them keep coming back again and again.
But… why keep customers if we can just continue our marketing efforts and bring in more new customers? Well, the answer is in the dollars. It costs seven times more to get a new customer than it does to keep a customer.
Once you convert a customer, you want them to stay. You want them to keep coming back so that their customer lifetime value is as high as possible. Customer lifetime value (CLV) refers to the amount of revenue that a customer will provide throughout their lifetime.
To find this number, multiply the average purchase amount by the purchase frequency. Then, multiply this number by the number of years that you expect the customer to stick around.
Next, use that number and subtract the cost of gaining that customer (marketing dollars) and the cost of service to that customer. Now you have your CLV.
((Average purchase x frequency of purchases) x years of involvement) – marketing and service dollars = Customer Lifetime Value
There are some things that you can do as a retailer to benefit your CLV. Create loyalty through implementing certain techniques, thus increasing your revenue for the long haul.
Get to know your customer
First and foremost, get to know your customer. There are different types of customers, and the key thing to remember here is that not all types bring in the same amount of revenue. Some are more loyal, some have more disposable income, and some are more interested in your brand than others.
The trick here is to figure out which of your customer groups are the most “important.” By important, I mean the group that generates the most revenue.
Then, focus your attention on that important group. Give them things to keep them coming back. Target them with marketing. Provide incentives. If they’re the group bringing in the most revenue, it’ll be the group that is most worth your focus (aka your marketing dollars!)
Provide excellent customer service
If you have ever worked in retail, you probably had a manger that emphasized customer service. Their idea of this probably involved greeting customers at the door, relaying sales messages, asking if they needed any help, staying on high alert for those that looked “lost,” etc.
With e-commerce, though different, customer service is just as crucial and needs to be an area of focus. But, have no fear. There are a ton of easy ways to easily do this.
- Website Chat: I’m sure you’ve been on a website and seen a little chat box pop up from the bottom right corner. Use this for your brand! Give customers the option to get in touch with a real person immediately without even having to navigate to the customer service page. If someone has a question when shopping, having a chat box readily available can mean the difference between staying and purchasing, or clicking off the page because they don’t feel like contacting the company to get their answer.
- Email: Even if you implement a chat feature, you still need to give customers the option to contact you through email. If a customer has a longer question or inquiry, this is typically how they will opt to connect. Be sure to provide prompt replies and stay on top of your communication. Customers notice this, and they appreciate it.
- Social Media: Social media has become a popular place for customers to voice their concerns with brands, Twitter and Facebook being the most popular. Providing support via socials is a great way to stay connected with your audience and offer prompt service. Since these are public forums, displaying great customer service is important. You don’t want to ignore customer inquiries and give off the message that your brand doesn’t care.
Think back to a time when you heard a friend talk about how poor a company’s customer service was. The story probably pops right into your head. Consequently, people share poor experiences more often than they share great ones.
Though word of mouth is definitely important for spreading brand awareness and recognition, it can do irreversible damage if it’s negative. People don’t frequently share their good customer service encounters because great customer service is expected.
However, when someone has a great customer service experience, they develop trust with the brand. Good experiences tell customers that they can come to that brand for what they need. As a result, they know that if they don’t receive what is expected, the brand will work to remedy the situation.
When you have great customer service, it keeps customers coming back and helps increase your customer lifetime value.
Give your brand a personality
People like relatable brands. They like purchasing from companies when they feel like they know the face behind them. You can positively play into this by creating a memorable personality for your brand.
To do this, get personal with your customers. Talk to them. Engage with them. Get to know them. Take part in their conversations and reply when they talk about your brand. Social media is a great place to make this happen.
Many brands use platforms such as Twitter, Facebook, and Instagram to offer fun, quirky, relatable content that gets users excited and involved. Through sharing fun things with customers, engaging in conversations with other brands, etc., many companies leverage social media to their advantage to increase their customer lifetime value.
Develop a loyalty program
A surefire way of getting customers to return? Loyalty programs. Loyalty programs provide customers with incentive to return all while saying “thank you” for being such a loyal customer. They encourage customers to come back time and time again in the attempt to rack up enough in sales to earn some type of reward. Rewards could include:
- Free items
- Discounts or sales
Choose what works best with your brand and customer image and get creative! Loyalty programs could be just what certain customers need to go through with some extra purchases.
Reward loyal customers with a referral program
Marketing can be expensive. A much cheaper option? Referral programs.
Referral programs are programs where customers get rewarded for sharing a brand with others. A perfect example is Glossier. Glossier encourages customers to share the brand with others by providing a 10% off link to hand out. That link is exclusive to the specific customer sharing it. When someone purchases something through the link, not only do they save 10%, but the owner of the link is given $10 to use toward the brand.
The customer has given Glossier a new buyer, and to say thanks, Glossier gives the original customer an awesome discount. Pretty cool, huh? It is no surprise that this incentive works great to get customers coming back. This contributes to their customer lifetime value in incredible ways.
Referral programs are an awesome way to gain new customers while encouraging the original customer to make another purchase. Because it’s so much cheaper than traditional marketing, it’s definitely an awesome type of program to introduce.
Share user generated content
Finally, users love brand recognition. Share user content to take advantage of this. User generated content (UGC) increases brand buzz and gets customers involved.
When customers post things on social media that include your brand, share them! Repost customers’ Instagram photos, retweet their tweets, etc. When a user shares your content on their social media profile, they are essentially giving your brand free advertising. Say “thanks” by getting involved and sharing their content with your audience.
Engage with your audience. Then, you will encourage other users to share your content too!
The bottom line on customer lifetime value
After reading this article, I’m sure it goes without saying: The more you interact with customers and provide awesome engagement, the easier it will be to create repeat customers and increase your customer lifetime value.
Implement the things mentioned throughout this article, and you will be well on your way to improving your numbers and getting to know your customers a little bit better.
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