Apply your CLTV knowledge
Once you calculate your customer lifetime value, what do you do with it?
CLTV is your guide to when you should and when you shouldn’t keep spending money on your customers. Simply put, your expenditures on customers shouldn’t outstrip the value your customers bring in. This helps you answer questions like:
- How much of a discount (if any) should I give first-time customers?
- Should I encourage my customer service reps to offer gift cards to inconvenienced customers? If so, how much?
- Is the amount I’m spending on advertising per customer worth it?
- Should I invest in my high CLTV customers by offering them more discounts and benefits?
- Is it worth offering monetary incentives to recapture this customer whose visit frequency is decreasing?
- Am I generating higher profit customers in one channel versus another?
- Is one marketing tactic attracting a higher value customer than another?
- How is my CLTV trending – Am I doing better this week than last week? If so, what did I do different to cause the increase/decrease?
Knowing your CLTV helps you spend your money intelligently, getting the most value out of your customers.
How to increase CLTV
Increasing your CLTV means more long-term profits for you, and if you’re doing it right, happier customers. The key is to increase how much your customers are spending, how long they keep coming back, or both. Your options include:
Increase the number of transactions
You want your customers to keep coming back for more! Consider remarketing programs such as weekly specials sent through email or actively engaging customers through social media to encourage customers to return and purchase, or membership programs (“get $Y off for every $X you spend at Carl’s Camera Co.”)
Increase average order value
Once again, membership programs are good at encouraging this, or “get $X off when you spend $Y” sales that apply to only one transaction. Bundling similar items together into packs is a great way to increase Average Order Value (AOV), as is proactively suggesting complimentary items (cross selling), suggesting a higher quantity of items at a reduced rate, or offering free shipping for orders over a certain dollar amount.
Decrease customer churn
Customer churn is no small battle to take on, but a good first step is investing in your customer service team. 70% of customers report leaving a business not because they were unsatisfied with the product, but because they were unsatisfied with customer service. Subscription businesses can also offer short exit surveys when customers cancel their membership, which can offer insight into why customers are leaving.
CLTV is an important part of every business’ toolbox, so do your budget a favor and make sure you don’t let it fall to the wayside.
Want to learn more? Watch the video below to see what our Director of Analytics has to say about improving your CLTV.