Your business should be built on customer retention
While winning new business is important, maintaining existing client relationships is even more profitable. Your marketing strategy should focus on your most valuable resource — your existing customers.
What is Customer Lifetime Value (CLV)?
Customer lifetime value (CLV) represents the total amount of money that a customer can be expected to spend on your company’s products or services during their entire relationship with you, or their “lifetime”. This is an important figure to know because it helps you make decisions about how much money to invest in acquiring new customers and retaining existing ones.
Why are repeat customers better than new customers?
- Repeat customers spend 300% more than new customers and are easier to sell to
- Repeat customers promote your business — they refer 50% more people than one-time buyers
- It costs you 5 times more to attract and obtain a new customer than it does to keep an existing one
- Just a 5% increase in customer retention can boost your profits by up to 95%
- Existing customers are 50% more likely to try out new products and spend 31% more than new customers
Why is Customer Lifetime Value important?
- It can fuel profits. Repeat buyers increase your customer lifetime value because retention improves sales per order as well as sales over time. Since acquiring a customer is a one-time expense and customer retention costs less, your CLV will increase and improve your bottom line.
- It can decrease customer acquisition costs (CAC). Brands that nurture and interact with their customers have higher profit margins and lower CAC. It’s expensive to constantly search for new customers, so the best approach is to take care of the customers you already have.
- It can help you sustain a steady cash flow. Repeat sales from existing customers create a regular cash flow. When you can depend on money coming in, it’s easier to decide to reinvest it in your business.
- It can increase customer retention and loyalty. It’s very beneficial for companies to identify their most valuable customers and offer them personalized incentives and rewards — repeat customers buy more and give you referrals and good reviews. Building strong relationships with new customers is also vital — you can accomplish this via tempting loyalty programs, outstanding customer support, and other profitable incentives to win their loyalty and long-term business.
- It enables you to target your ideal customers. Calculating CLV can give you a snapshot of the types of customers who spend the most money on your products or services. This means that you can segment your audience accordingly and use look-alike modeling to target those matching your highest-CLV customers.
Your goal is not only to make your brand more visible, but also to create a brand community by offering direct connections and conversation options— turning brand fans into true advocates.
This is the key benefit of social media marketing. Social media platforms give everyone a voice and enable customers to maintain brand relationships and build on them over time. They also give customers the opportunity to amplify your message within their networks, which reach further than ever before. Brands that listen to customers and respond to their needs are the ones that succeed in social media.
Use these 7 tactics to help increase your customer lifetime value
- Retarget one-time and repeat customers by showing them related products
- Get creative with customer service by offering omnichannel support, 24/7 support, or live chat
- Create an easy-to-understand loyalty program which makes the first level easy to satisfy so customers break the barrier to entry more quickly
- Highlight loyal customers and feature them on social media. Leave the content generation up to your fans while making them famous on Instagram and TikTok.
- Build a community by allowing customers to upload photos of themselves wearing/using your products and add links so users can buy them
- Listen closely to your customers and collect actionable feedback from them so you can fuel customer satisfaction
- Make the shopping experience as seamless as possible. Ensure that your service, app, or product more convenient than those of your competitors
Check out this infographic from GetVOIP to see some techniques that companies use to grow customer lifetime value: