A customer lifetime value is a definition of how much profit the customer brings to the business during their customership. The term is also well known as CLV, CLVT AND LTV.
Even though the term is quite often used, not many companies actually know, what is their general customer lifetime value. Not to mention, what are the characteristics of their most valuable customers, how their buying journey have gone, or how the lifetime value is distributed over time.
The lifetime value is an interesting concept for companies for many reasons. Among other things, it can be used to make business more predictable or to focus marketing more on those customers who are most valuable in the long term.
For the analysis of Customer lifetime value there is a lot of different services. For example, if you have a Shopify e-commerce store you can use Lifetimely.
However, the subject of this blog is not to determine the lifetime value of your customers or to learn to analyze the best customer groups or marketing channels based on it, but to maximize the lifetime value of an individual customer.
Once you have obtained a customer, how can you get the most benefit out of them and how to stop them from joining the competition instead?
3 tips for customer lifetime evaluation
1. Move from project business to recurring revenue business
In order to maximize the lifetime value, it is usually worthwhile to try to create different containers, to create a continuous customer relationship instead of a single project.
As a continuous service, we offer, for example, visibility in our online service, a referral tool and sparring with our customer success team.
2. Make more sales after the first purchase, and make sure the old customers are being contacted on a regular basis.
It is very common for online shops to use re-activation campaigns with their email marketing, that are meant to convince the customers to buy again, before they end up purchasing from a competing business.
In sales organizations, the same thing works many times so that the seller is assigned to contact the customer again at a specific time in the CRM. Building this type of loops are essential for maximizing the lifetime value of a customer. Of course, it is worth the effort to obtain new customers as well, but the ones already existing shouldn’t be forgotten.
3. Define your most high potential customers, and focus on treating them extra well
Increasing the lifetime value is also about focusing. A two-person company obviously has a smaller budget, than a for example 472 million listed company does.
If your ideal customers are listed companies with more than 200 million exchanges, you should make a clear plan for increasing your customer base with these types of clients.
Make a step by step -plan that clearly shows which issues are focused on at which point, and how to get the customer to buy as many products from your company as possible.
Typically, this means that first you will sell services that cause an immediate positive surprise – aka you get fast wins.
After this, the goal is to get the customer to buy all the possible products suitable for them from the company’s portfolio.
Summary of maximizing the lifetime value of a customer
It is not rocket science, but it can be science.
Make decisions based on data, and make determined efforts for growing the lifetime value of your customers. So in addition to obtaining new customers, focus on getting more out of the customer your company already has.
At the end of the day it is all about if the customer feels like you are offering a lot of added value. If the customer feels like your services are bringing a lot of value to their business, they will most likely buy more.
And on the contrary, if the client feels like your services are not bringing them any added value, they most likely won’t buy it again.
So in the end, maximizing the customer lifetime value is a lot about focusing: what is the best target audience for my product or service?
You can try to figure out the target audience by thinking, or using quantitative or qualitative data.
Usually you can get further by using some form of data, than by thinking about options without any actual touch with the clients. If there is not yet enough quantitative data to be found, the only reasonable option is to perform a qualitative customer research.
With a qualitative customer survey you can figure out the highs and lows, and what are the common factors all your best customers share with each other.
What are the things they value the most, and what is it that made them purchase in the first place?