4 Data-Backed Strategies to Increase Your Customer’s Lifetime Value (CLV)


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Every week you crunch numbers. Profits, losses, margins, costs.

But are you also calculating Customer Lifetime Value? If you’re not, you’re overlooking a potentially valuable metric.

Quite simply, CLV sounds like what it is. It’s a prediction of the total net profit attributed to a customer over the course of your relationship with them. Why is it important?

Knowing this number will help you understand your repeat business – and just how much you can expect to make in net profit from a single customer.

In turn, you’ll have more insight into how much is prudent to invest into each customer. You can then spend more efficiently and effectively on marketing and customer retention programs. You can also communicate better with customers and provide them with a more positive experience.

And while it sounds complicated, in actuality, CLV is one of the easier business metrics to figure out. Here’s an equation to help you determine yours:

(Average Order or Sale Value) x (Number of Repeat Sales) x (Average Retention Time in Either Months or Years for a Customer)

Now let’s put that equation into practice with a real world example. Say you run a coffee shop. Your typical order cost is $4.90 and customers visit you about three times a week with an average customer retention of five years. That means your CLV is $4.90 x 3 days a week x 60 months = $882.

With this number in mind, you can better understand your customers and make smarter decisions about how much to invest in marketing, when and how much to discount, and how to tailor new products and services to them. You’ll also have more insight into just how much your customers are spending and how often.

According to stats

That said, according to statistics, a customer has a 27% chance of returning to your business after their first visit. So if this sounds familiar – you’ve crunched the numbers and your CLV could use some work – what should you do to inspire loyalty? There are plenty of ways to misuse data, or poorly allocate your inhouse data specialists, but there are also plenty of ways to hit a home run with data analysis. Here are several data-backed strategies to consider:

Tip #1: Improve the customer service experience.

Collecting, assessing and acting on real time data during the customer service process can separate you from the competition. For instance, when a customer calls, your service representatives should know details like the plan the customer has, features they use, purchasing history, and how long they’ve been a customer. Having this kind of data at their fingertips means they can deliver a more memorable customer experience.

Tip #2: Invest in customer segmentation.

You can’t take a one-size-fits-all approach to your customers. And by segmenting them out – whether by psychographics, lifestyle, geography, etc. – you can determine important factors, such as which types of customers use which services or features most and how often they engage with your brand’s social media posts. The data you glean by segmenting customers throughout their life cycle will help with the next tip.

Tip #3: Make personalization a priority.

In today’s web-driven, competitive culture, personalization is critical to business success. Consider sites like Amazon.com. It’s a great example of personalization through its product recommendations and other content tailored to unique users. And in fact, according to a study by PWC’s Digital Services Group, 94% of senior leaders think personalization is critical or important to reaching customers.

94 percent of seniors

Tip #4: Use a good customer analytics tool.

This is especially important for an e-commerce site because analytics can show you where there are issues in the user experience. For instance, if your customers are abandoning their shopping carts at an alarming rate, you can use analytics to access session replays and behavior flow reports. You’ll then be able to uncover – and rectify – problem areas.

At the end of the day, improving you CLV simply means improving your customer experience. And with today’s technology, along with big data, there are seemingly countless ways to figure out where to focus your efforts. It’s up to you to find the ones that best work for your business.

Ajay Paghdal
Ajay Paghdal is the founder of Youth Noise, a digital marketing firm and OutreachMama a productized marketing service, and a contributor to entrepreneur.com and business.com.


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