Despite increased use of social media, many brands struggle with customer lifetime value. Yet, retaining a truly loyal customer base can be achieved by following simple principles.
Customer Lifetime Value is Vital
It’s much cheaper to retain an existing customer than to acquire a new one. This is especially true in industries where the bottom line depends on a long-term view of sales and revenues.
In one study, KiSSmetrics found that on average a lost customer costs a brand $243. Other findings showed that businesses have a 60-70 percent probability of selling to an existing customer. This falls to 5-20% for a prospective or new customer.
Why do so many businesses struggle with retaining existing customers? It’s because they focus more on the transactional value rather than the customer’s experience after the transaction. Yet, the customer’s experience after the conversion is at the heart of maximising customer lifetime value.
Here’s a simple formula for calculating customer lifetime value:
(Average value of sale)
(Number of repeat transactions)
(Average retention time in months or years for a typical customer)
So, what can brands do to increase the customer lifetime value, when customers are presented with so many choices?
Don’t Give Customers a Reason to go to Your Competitors
To keep customers around for the long term, provide them with real value that can’t be found anywhere else. This is not about giving free stuff or discounts. It’s about offering additional resources and services that differentiate your brand from your competitors. This includes exceptional customer service.
Go the Extra Mile to Offer Extra Convenience
Convenience comes in many forms whether that’s refills, automated billing, free delivery, easy money-back guarantees or just simple reminders. If customers can spend more time enjoying your product, you’ll keep them around for the long-term.
To offer convenience, you must understand your customers’ needs to determine what would make their life easier.
Don’t Compromise on Quality
After a while, lots of brands start to lose sight of the initial value they offered. This is a sure way to lose customers. Customers don’t stay loyal to poor quality. On the contrary, they continue to spend on products that give them value for money.
The more consumers feel they are getting value from a product or brand, the more they are likely to share the news with their friends and family.
Solve Their Problems, Fast
Customers are increasingly intolerant of brands with poor customer service. In one study, up to 72 percent of customers ranked customer service as the biggest reason why they remained loyal to a brand.
Social media pages, blogs and discussion forums have become the new way for customers to engage with brands. Use these channels to listen to your customers so you can solve their problems on time.
Customers will stick with and promote brands that listen and swiftly address their concerns. By contrast, 45 percent of customers will abandon their shopping cart if their questions about the product are not answered in good time.
To get more value from your customers you need to integrate processes that make it easy for them to make additional purchases. Used well, automation can be helpful in nurturing customers and keeping them in the sales funnel.
Automation is also a great way to link all your marketing efforts including social, email, SEO and lead generation so customers have a cohesive and seamless experience with your brand.
Make it Personal
Amazon and Netflix does an excellent job of personalising its customers’ experience. They provide relevant recommendations based on an individual’s needs and purchase/viewing behaviour.
People want to see you are anticipating their needs and giving them opportunities to meet these needs. These feelings of convenience and “specialness” largely drive purchase behaviours.
Reward Your Loyal Customers
Incentivising your customers is a great way to retain their loyalty and keep their business. Incentives can be as simple but as meaningful as providing access to exclusive content. Further, you could create an exclusive club for super fans or recognise fans by placing them in the spotlight and publicly appreciating them.
Make a point of getting up-close with your customers. For example, send them something they care about. A good way to do this is looking at their social profiles to see what they enjoy, and then surprise them with a gift you know would be meaningful to them. Keep customers loyal and they will become some of your greatest brand ambassadors.
Understanding your customers’ journey is critical to meeting their needs, retaining their loyalty and ultimately keeping them in your sales funnel. Have a good look at your own data. It will show you possible gaps in the customers’ journey, so you can identity better ways to maximise customer lifetime value.