Businesses gain and lose customers throughout the company’s lifetime. However, a great service/ product can help retain customers, such that they crave more from the company. CLV (Customer Lifetime Value), often known as LTV (Lifetime Value), refers to the profit margin expected by a company over its entire relationship with the customer. Regarding customer lifetime value, CAC or customer acquisition costs, operating expenses, marketing, and manufacturing costs are considered. Often, many companies take an unsustainable approach by ignoring this worthwhile metric which has been found to enhance profits from about 25 % to 95%, as per the HBR report on the matter. Thus, augmenting the potential customer lifetime value is extremely important for the business.
How to Calculate Customer Lifetime Value Calculation?
Before calculating CLV, a financial projection, businesses need to make well-informed assumptions. For instance, to calculate customer lifetime value, business owners need to know the rounded-off value of the average count of transactions and the duration of the customer relationship.
Once done with this, you can calculate CLV by following the below-mentioned steps:
First off, reckon the lifetime value by multiplying the average sale value, the average customer retention period, and the average number of transactions.
Lifetime Value = Average Sale Value* Retention Time Period* Number of Transactions
Since CLV is measured in terms of gross revenue, it disregards operating expenses and does not consider them.
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Surefire Tips To Increase Customer Lifetime Value (CLV)
Augmenting CLVcan be either very simple or even arduous. However, by implementing the below-mentioned strategies, you can see a spike in your average CLV while generating more revenue from your current customers.
1. Enhance the Onboarding Process
No effort must be spared when it comes to the onboarding process to ascertain truly sustainable business growth. It must be prioritized, that’s because poor onboarding can trigger churn. At this point only your customer engages with your product, and just by improving it, you can make a positive impact. So, it is important to consider and put together a solid onboarding process to motivate the new users to revert for more, boosting their lifetime value to your business. The strategic onboarding process can differ depending on the industry. However, some general tips would be to offer walkthrough guides and curate how-to videos, tutorials, etc., to assist and engage customers.
2. Offer Valuable Content That Engages & Adds Value To Customers
Email marketing is one of the smartest strategies you can adopt regarding customer retention. However, the bad news is that most businesses don’t get it right. Instead of bombarding generic content, try producing and offering value-packed content. Informative content can help you increase your engagement with customers while providing data about their interests. Value-packed content can help companies map their customer’s journeys, recognize the touchpoints, and, thus, send out immensely targeted, personalized campaigns.
3. Deliver Omni-Channel Support
For businesses, it is extremely important to stay active on as many channels as possible. Cross-channel interactions make up for a considerable impact on customer retention and advocacy. Nowadays, most individuals keep more than one device and continuously switch them for searches and browsing. Thus, businesses need to discover which channels their customer use the most. Once you know it, your teams can handle the channels effectively while providing the customer with proper contact support.
4. Monitor Social Media
When clients/ shoppers reach out to social media, whether requesting support or leaving a grievance, they do it because they anticipate a quick response. About 84% of customers expect a response within 24 hours, as the report from SocialMediaToday indicates. In case they haven’t been provided with a proper or no response at all; they will share their dissatisfaction with their followers and friends on social media. Keeping these and related risks in mind, companies can focus on their customers on social media, prioritize the complaints, and, thus, enhance their journey with you.
5. Offer Live Chat Support Facility
As per Salesforce’s report, about 80% of buyers expect companies to interact and respond to them in actual time. And the best way in which you can accomplish this is lie chat which is buyer-company interaction that occurs in real-time on the company’s application or website. Many online buyers find live chat extremely worthwhile as it helps them instantly clear their doubts. Furthermore, live chat is well equipped to work remotely, making it easier for the company’s team to support customers round-the-clock.
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