5 Ways to Increase The Lifetime Value Of A Customer
With the right data and a little insight, you can uncover valuable segments of customers who are waiting to jump at the chance to buy more.
We live in an age where “Customer is King." We want to acquire more customers, as quickly as possible, but o
f course, only the RIGHT customers that will become our most loyal fans, buy from us consistently, and spread the word about just how great our company is.
Although it can cost 7 times more to acquire a new customer than retain an existing one, a growing customer base is certainly important to any business.
However, while acquiring new customers should always be top of mind, don’t lose sight of the valuable customers you currently serve. With the right data and a little insight, you can uncover valuable segments of customers who are waiting to jump at the chance to buy more (they just need to be presented with the right offer). Or perhaps your new customers that have bought once or twice and just need to be nudged with a special incentive. There are most likely many untapped revenue opportunities in your customer base – you just need to discover where they are.
Here Are 5 Ways To Increase The Lifetime Value Of Your Customers:
1. The Foundation Of A Lasting Relationship: Get To Know Your Customers
When it comes to relationships, we all want to feel special – greeted by our first name (of course), remembered on special occasions, and maybe a little gift just because.
And when it comes to your customers, the same rules apply. This means taking the time to integrate and analyze your data to get to know your customers on a more personal level. Beyond just their first name, learn about their likes and dislikes, lifestyles, channel preferences, and purchase history. When is their birthday? How much have they purchased? When did they last purchase? Each of these insights and details create the foundation for that perfect, long-lasting customer relationship.
2. Create Positive Experiences
Once you have collected the data and gathered the insights, you are ready to start applying this knowledge to really ramp up brand loyalty. This begins with creating truly unique and positive customer experiences.
Companies that deliver truly outstanding experiences for their customers know the importance of using their data to create customer segments. No one wants to receive every offer you have on the table – remember, you want your customers to feel special, so take the time to show them that you care by applying analytics to discover which offers and messages will be most appealing.
Beyond just sending relevant offers and promotions, positive customer experiences must be created along every touchpoint on the customer journey. For example, research by Invesp shows that 45% of consumers are more likely to shop on a site that offers personalized recommendations and 56% are more likely to return to a site that recommends products.
And the pay-off is certainly worth it. A study by Medallia Analysis found that customers who had the best experiences spend 140% more compared to those who had the poorest experience.
3. Communicate Through Multiple Channels
Customers want to be communicated to when and where they want, and through the channels they most prefer.
In case you aren’t completely convinced on just how important this is, take a look at some compelling statistics:
- According to a study by Harris Interactive, 56% of consumers would switch to another company if an alternative offered more options to connect with them
- 60% of consumers don’t want to be contacted over the phone about special offers, information and upgrades, while 75% prefer contact via email or text message. (ClickFox)
- According to a study from NM Incite, nearly half (47%) of U.S. social media users today actively seek customer service through social media.
To determine which channels your customers prefer, provide easy ways to opt-in or opt-out of certain communications. Today’s customers are used to using multiple channels and expect to be able to move fluidly from one channel to the next. So even though they may opt-in to receive communications one way, marketers must also leverage other types of preference data to ensure customers are receiving information in the way they prefer.
Consumers are no longer looking for just the best deal when making a purchase decision. They want to have a relationship with a brand. And just as you wouldn’t want to be called at midnight by a telemarketer, respecting your customers’ communication preferences goes a long way to keeping your customers loyal and coming back to make repeat purchases.
4. Use Modeling To Predict
Predictive analytics can help companies deepen customer relationships and lifetime value by better targeting the right customer at the right time and with the right message. It is used to identify strategic customer segments based on their past behaviors to forecast future actions.
Consider the following examples of how a predictive model may be used:
- Response modeling
This type of modeling is used to identify customers or prospects most likely to respond to marketing offers. By collecting and analyzing data on individual customers, marketers assign scores to individuals representing their likelihood to perform a desired action, such as a product purchase. Highly targeted offers can then be sent to those with the highest scores.
- Propensity to Purchase Model
This refers to the likelihood of a customer to purchase a particular product. By better understanding a customer’s purchase propensity, consumers in the market can be targeted with the right offers at the right time. Types of data that are often included in this type of model include purchase behavior in the last 12 months, amount of spend, frequency, and other actions such as increased clicks on a website.
5. Focus On Up-Sell And Cross-Sell, Or…“Do You Want Fries With That?”
Up-selling and cross-selling your customer base is about introducing your customers to complementary items they may be interested in. According to research by Forrester, product recommendations like upsells and cross-sells are responsible for an average of 10-30% of ecommerce revenues.
If you are buying a hamburger at McDonald’s, chances are that you will also be offered fries (cross-sell) and “do you want that super-sized?” (up-sell). However, for most businesses, it takes a bit of data and analytics to uncover ideal cross and up-sell opportunities.
For example, a retailer may apply analytics to their customer database and discover a segment of shoppers who has purchased dresses but no accessories. However, by capturing on-line browsing history or abandoned cart purchases, the retailer also discovers this segment of shoppers has checked out the matching jewelry, coordinating scarves, and perhaps a handbag or two. This is the perfect opportunity to send an offer or discount to encourage a purchase.
Any number of opportunities such as this can be discovered in your data – it simply takes the analytics to discover hem. Check out the short 3-minute video below for an overview of how to do this.
When you increase your company’s customer lifetime value, you are generating more brand loyalty, increasing retention and contributing to the bottom line. Continue to focus on new acquisition, but don’t lose focus on your most valuable asset – your current customers.
For more tips on how to maximize your revenue with data and analytics, download this free guide.
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