Customer lifetime value: four phases to maximize success & profitability


Share on LinkedIn

In any business, the customer experience and customer lifetime value can make or break your ability to drive and accelerate both growth & profitability. In a software as a service (SaaS) business, that impact is magnified further. The economics of SaaS tend to make acquisition costs fairly high as a function of early revenue, thus counting on longer customer lifetime value to drive efficiency and profitability for the business.

Unfortunately, our actions don’t always reflect this understanding. Look at most businesses, particularly those in early stages of development or growth, and you’ll find teams heavy on acquisition focus but light on retention. Marketing teams with 80 percent (or more) of their focus on acquisition but executing table stakes (maybe a newsletter, maybe a light customer portal) to make new and existing customers successful and loyal.

At the SiriusDecisions Summit earlier this year, Megan Heuer highlighted a four-part model for an optimal customer lifetime value framework. In her words:

Deliver (Initiate)
“After someone buys, you need to reassure them that they’ve made a good choice, and prove there will be value in the relationship. These tactics include onboarding program offers, account plans to define relationship goals and thank you notes. Make sure you’ve rolled out the welcome mat and the customer has walked through the door.”

Develop (Participate)
“From a sales and marketing perspective, if you drop the ball after that welcome phase — even if you’ve made a good second impression — if you blow it in this phase, the formula for calculating customer lifetime value won’t hold up. This stage can go on for years in some relationships, so you need to develop what it means to be a customer by helping them understand what they can get out of it.”

Retain (Actualize)
“The better job you do at the beginning to set up value expectations, the better you’re able to describe it and review it in a quantitative way to measure the value you’ve brought to the customer. You may not get here to this phase and you might fail if you don’t understand the value of the first two steps. But if you’ve done a great job, then you’re going to have a lot easier time and can progress to stage four.”

Growth (Advocate)
“It’s not just about holding onto business; it’s about making the business become a partnership with you. Sales and marketing can predict the next steps to purchase and build a reference team empowered to reach out to clients, identified as happy, to engage them with other clients.”

Think of the pre and post-sales process, together, as a bow tie. Most companies build a model that ends at the sale. But in the framework above, and with companies that invest in customer success initiatives to lengthen customer lifetime value, that first sale is really the start of realizing the true potential of the customer relationship and revenue opportunity.

What’s more, market-leading companies don’t manage and execute the pre and post-sales processes separately. They’re part of a single, customer-centric strategy that tells, reinforces and delivers on a clear promise.

Republished with author's permission from original post.

Matt Heinz
Prolific author and nationally recognized, award-winning blogger, Matt Heinz is President and Founder of Heinz Marketing with 20 years of marketing, business development and sales experience from a variety of organizations and industries. He is a dynamic speaker, memorable not only for his keen insight and humor, but his actionable and motivating takeaways.Matt’s career focuses on consistently delivering measurable results with greater sales, revenue growth, product success and customer loyalty.


Please use comments to add value to the discussion. Maximum one link to an educational blog post or article. We will NOT PUBLISH brief comments like "good post," comments that mainly promote links, or comments with links to companies, products, or services.

Please enter your comment!
Please enter your name here