Every customer is valuable to your business, but how valuable are they over the lifetime they do business with you?
Every merchant should know the customer lifetime value (CLV) of their customers because it’s a telling metric that can help you make important marketing and business decisions.
No matter what your CLV is, taking steps to improve it can drive revenue increases and that’s the proof in the pudding for your bottom line.
In this post, we’ll share actionable tips to increase the lifetime value of your customers.
3 ways to increase the lifetime value of your customers
For the purpose of this post, we’ll focus on three ways you can impact the lifetime value of your customers.
1. Increase average check size
The goal here is to get each customer to spend a bit more each time they visit. You get a latte lover to add a bagel to his order, or a convince a happy hour regular to add on an appetizer. Each customer increases their average spend, and in turn, increases your incremental revenue. This may sound challenging, but when you engage your best customers, it’s not. More on that in a few.
2. Increase sales from unexpected sources
Tapping into a segment of customers you may have overlooked is a great opportunity to squeak out some additional revenue. Say, for example, you have a segment of customers that has churned. Do you just shrug and write that off? No way! You can tap into churned customers with a winback campaign and generate heaps of revenue you previously just wrote off. More to come on this, as well.
3. Reduce costs
Another way to increase sales is to lower the cost of goods and labor, which in turn, gives your bottom line a boost. However, you have to weigh the benefits to your customer experience before cutting anything that could impact customer satisfaction.
Strategies to increase customer lifetime value
Now let’s discuss specific strategies to increase customer lifetime value.
Strategy #1: Use data to send targeted messages to specific customers
Goal: Increase average check size
To encourage each customer to spend more, follow these steps:
- Use data
Data is power, and frankly, it’s the only way to get to know your customers. Recognizing a familiar face here and there isn’t going to drive the kind of repeat sales you need to impact lifetime value, but data sure can.
By capturing behavioral data like average spend, visit frequency, revenue generated, and which products customers buy, you gain complete understanding of customers and their preferences.
- Segment customers
Using the data you have about your customers, they can be segmented into like-behaving groups. Your customer engagement platform should do this for you and can segment customers by their visit frequency, or group customers by a myriad of other behaviors or desired actions like customers that only visit during the weekdays.
Your VIPs are a powerful revenue driving group and an excellent segment of your customers to tap into when you are looking to increase spend since they are the customers that visit often and spend the most.
- Send targeted offers
Working with your VIP segment you can easily create a targeted offer that brings these customers back – and increases their next order.
For example, the VIP that comes in 3 times a week and always orders an appetizer could be
The promotion should get your VIPs to buy an add-on item that’s in addition to their usual purchases or a larger price point item which increases their check size.
Strategic offers aimed at VIP customers can boost individual average check sizes, and as a result, boost the customer lifetime value of your best customers.
Strategy #2: Target an untapped segment of customers
Goal: Increase sales from unexpected sources
To boost sales unique sources, focus on customers who are about to churn. Here’s how:
- Identify lost customers
Again, this strategy starts with data. You can begin by understanding which customers have lost interest. For example, if Clare typically comes in for a glass of pinot noir every Friday night, and she’s missed the last six Fridays – something’s up and it might not just be because of “dry January.”
- Winback customers
Your mission: winback customers. Use your customer engagement platform to automatically send a win-back campaign that reminds customers about your business and offers an incentive for them to return. For example, you could send Clare an offer that says, ”Stop in this Friday and enjoy $5 off a glass of your favorite pinot noir.”
How does this help? Winback campaigns not only encourage customers to come back, but they also have a carry-over effect. Forty-five percent of customers that receive a winback campaign read subsequent messages, according to research from Marketing Land.
Strategy 3#: Reduce costs by simplifying your tech stack
Goal: Reduce costs
The third strategy aims to reduce costs by evaluating your martech stack. Your martech stack is the group of marketing tech tools that you use to reach customers. Everything from your CRM to your email marketing software falls into your martech stack. Here’s what to do:
- Evaluate your martech stack
Take stock of the tools you use to connect with customers. Make a list of the tools, the time devoted to each, the cost and the ROI. If you don’t know the ROI you should consider dropping the tool as you should be able to measure the impact of every marketing tool you use in terms of the revenue it drives.
- Identify problems
Do a quick count. How many tools are using? If you’re juggling a lot, that’s a problem. Look at what you use each tool for and consider searching for an all-in-one tool that helps you focus on overall customer engagement.
Look for redundancies. Are you using two tools when one will accomplish the same goal?
Examine how much time you spend using each tool too. If you spend a lot of time “managing a tool,” meaning you spend more time trying to make a platform work for you than you do actually reaching customers – it might be time for something different.
How well do your tools work together? Does your CRM work with your survey provider? Does your email provider work with your analytics tool? Your tools should play nicely together or better yet, use just a few tools that do many things well and provide you the data and revenue reporting you need to know they are working at driving the results you want.
- Make a change
Your martech stack is important, but the goal is to help you engage customers and drive revenue. If it’s failing you, it’s failing your business – and failing your customers.
Take some time to investigate one-stop customer engagement solutions. You want platforms that offer multiple features like data collection, segmenting options, ways to communicate with customers via email and push notification, and real analytics that show you how your efforts impact your bottom line.
Wrap up
In this post, we’ve shared the importance of understanding the lifetime value of your customers. We’ve also shared three ways you can increase the value and keep your revenue going up and to the right.
