Increasing customer lifetime value (CLV) is one of the largest priorities for any business since it increases revenues, decreases marketing costs and shortens the sales cycle.
While there are many ways to increase CLV, today I'll discuss three strategies along with tips you can use and put into action today.
Strategy 1: Decrease Per Customer Expenses
Companies that have lowest customer acquisition costs are also ones that have word-of-mouth working for them.
As much as word-of-mouth sounds like “can’t be controlled” or generated, it is very much a deliberate exercise. Companies do spend their time and effort generating and controlling word-of-mouth by keeping an investment mindset.
This means you have to invest in your customers, your partners, and your allies. It's all about relationship marketing and doing it properly will help you tap into your customers' network, and your partners' and allies' audience.
Here is how you can execute.
Customers: Just ask them for a referral. You don’t need to set up a complicated referral or an affiliate program.
You can just do something as simple as sending them a feedback email after their purchase or call them. If they are happy or satisfied, you can ask them for a recommendation. Most customers are happy to give recommendations, but very few companies ask for it.
You can mention your customers and their business on your blog, twitter, facebook wherever they are. For example, you can use facebook as a platform to share your customers stories.
You can also mimic what Humans of New York on Facebook is doing. They share one person’s story of struggle and triumph to put a human face to steel and concrete new york.
You can do the same for your customers. You could just share their stories of struggle and triumph. Everybody can relate to those.
Alternatively, share customer stories that relate to your product’s overall philosophy. Showcase customers similar to your target customers.
It can be anybody in sales, marketing, customer support. Create a mix of these stories. Titles and departments don’t matter as much as themes. Stories featuring your products and clients talking about how they are overcoming their challenges can be helpful to others and help to build a community.
Allies and partners:Write posts on each others blog, promote each other’s products or services. Lots of companies this. GrooveHQ reached more than 1 million people by leveraging other websites' traffic through guest blogging.
You can also provide special deals. Moz did this early on. They provided customers within partner channels an extended trial of their product. Their standard trial was 30 days, but customers within partner channels received an extended trial that ranged from 45 days to 120 days.
Even better, build a tool that helps their customers and turn them into your customers. This is also a good way to generate buzz for your product.
If you don’t have in-house developer teams who can spare some time to do this, then go ahead and try to do it manually.
It’s okay if you can’t scale the process right now. Just get it to work it successfully. If it generates qualified leads, then you can spend the money to automate the process or turn it into an app or tool too.
Strategy 2: Improve Retention
Good customer contact can build good relationships and more importantly, keep them warm.
Just like it is easier to grow your revenues from your existing customers than acquiring new customers, it is easier to keep a relationship warm rather than warming them up every time.
Some of the obvious ways of staying in touch with customers in today’s world means email marketing, using social media, making use of handwritten notes, phone calls, etc. It’s all about touchy-feely discussions when it comes to taking care of customers.
But it's not about the number of times you reach out. Instead, customer satisfaction and custom loyalty is based on the quality of the interaction. Because if your customers are not paying attention to you, then some of your best retention tactics will fail.
1. Stand for something.
These are the things you believe in how something should be done or not done.
Everlane believes is not over-charging customers for quality and transparency.
Warby Parker believes in providing people glasses at an affordable price and still do good for others.
2. Utilize positive social proof.
Who does this better than Facebook.
Have you seen notifications about a friend, or friends who have liked a post just above it in your feed? Or even when you are a blog page, you see X,000 subscribers just above the box.
These are all examples of social proof at work.
3. Utilize surprise reciprocity.
Surprise and delight your customers. Have you ever gotten a second surprise mint from your waiter or put your order on the house because they screwed it up?
Were you surprised? Did it make you smile? Do that for your customers. Make them feel happy. Make them smile.
This can beat any of your expensive customer retention campaigns.
4. Customers enjoy businesses who know them.
If you are talking to customers make it personal. This is when knowing your customers really helps.
If you know your customers, you will be able to talk to them in their language.
The more granular you can get, the more personal you conversations and communications will be.
5. Get people started.
This one is so simple and yet most businesses miss this. Get people started on a referral program. Sign them up as soon as they purchase your product.
Mike Filsaime of WebinarJam did this really well. He generated 3 million dollars in sales in less than one year.
When people subscribed to his webinar tool, he automatically signed them up to referral program. This is just a minor variation in Dropbox’s now famous growth tool… free space for inviting your friends.
This is so simple and people keep harping on finding ways to grow. Yet people often overlook these tools.
6. Get ideal customers to VIPs/Label your customers.
Make customers feel special. American Express did this really well when they first came out with their Gold cards until everybody in the neighborhood had one.
Another good example is one Greg talked about… Buffer. They call their premium customers “Awesome” members.
Give them a positive name and make them feel like part of the community. While the first one might be easy, the latter takes consistent and persistent work but it’s not hard. It’s definitely not rocket science.
7. It starts even before you sell. This one starts way before your customers already buy from you.
Make sure when you or your sales team makes a pitch to the prospect, you have researched the prospect. You should know who they are both on your website and outside of it.
Your goal is to know their hopes, fears, and dreams as Ramit Sethi would say it. This could be totally specific to this person or you could borrow some from your understanding or customer personas similar to this prospect.
Now craft your pitch for them. As Greg says, “Make it personal."
A pitch that is personal with value-add specific to their problems will make them use your product longer, or at least avoid feeling buyers remorse and abandoning it.
You don’t need to follow everything. Pick your top 3 to focus on. Even if you are limited on resources, pick one and start doing it today. More resources will open up.
You also want to make sure you provide good support to your customers. Two things to plan for:
- How you are going to stay in touch with them for the rest of their lifecycle
- How you are going to communicate with them during a time of crisis. Who is responsible for updating them and how open is your interaction going to be with them.
Strategy 3: Upsell.
I won't get too in-depth here as the ins-and-outs of upselling deserves its own post. But here are few things that you should keep in mind when upselling.
- Don’t try to sell them too many things at once, and customize the upsell based on their past purchases. If you can’t customize the product because of limited tiers in your product, at least customize your pitch.
- Don’t constantly bombard them with upsell offers. Use the same principle as you would when you are sharing on social media… one promotional tweet for every 3-7 helpful tweets.
- Do not talk about your features. Talk about their problems in the form of a story. Here is a great tip that all copywriters use – AIDA (Attention, Interest, Desire, and Action). Learn this and memorize it.
- If they can’t afford your upsell offer, use payment plan options but don’t give discounts.
- If nothing else works, get feedback
Wrapping It Up
As you have seen from all the tips, one common key to increasing customer lifetime value is know your customers.
Always focus on your customers no matter how young your business is and how strapped you are for resources. There is always a way to implement these tips on a negligible budget. You are only limited by your creative problem solving.