Your customer base is constantly increasing, your sales go up, but for some reason, the overall money you make at the end of the month does not change? This is the reality for a lot of small businesses out there, but why is that?
The reason could be a low customer lifetime value, but what even is a customer lifetime value, and even more important, how can you raise it?
What is the customer lifetime value?
By calculating the customer lifetime value, you determine how much your business can earn from the average customer over their relationship. The basic formula calculates by multiplying the average order value with repeated sales and the average retention time. However, you can get a more in-depth picture by adding purchase frequency or monetary information into the equation. Segmenting your customer base also helps further. Especially frequency can make sense when you are selling a product that's nature it is only to have a short retention span.
An example here is baby food. A parent only buys baby food while the child is still young. After at least 3 years, they just won't need it anymore. It is imperative in this circumstance to include the frequency into the equation. People might not stay loyal to your business for too long, but they might buy from you very often at this time. Furthermore, by segmenting your customer base, you can't only evaluate your most valuable customers but also tailor your marketing efforts to this specific group.
Why is it helpful?
With an idea of your customer lifetime value, you can make informed marketing and sales decisions and understand what works well and what doesn't. Comparing your CLV with your customer acquisition cost is an easy way to determine how good your customer base is and their long-term growth potential.
Questions like "how much can you spend to acquire a similar customer" or "what kind of product do customers with the highest CLV want" are answered in a heartbeat.
Having your own business has lots of benefits. You’re your own boss. You can work when you want and sell whatever you want, but it can quickly become stressful if the company is not profitable. Figuring out who your most valuable customers are and which products have the highest profitability helps push your business further and puts your mind at ease.
How to raise customer lifetime value
Having a high customer lifetime value is more than desirable and getting it is possible. Even though every business is unique, by implementing a few points, every business can increase its customer lifetime value.
There are many ways to implement a personalised experience. The most common way is to personalise your post-purchase email to ensure your brand stays in your customer's minds. Personalised product recommendations are one way of engaging the customer further with the help of personalisation. Did they view another product from your website before purchasing from you? Are there any other products that might work well together with the shopped item? Has there been a purchase pattern from this customer that you can capitalise on?
All these efforts show your customer that you care about them and at the same time motivate them to buy from you again. All these efforts are based on a vast amount of data that needs to be collected to really know your customer and react to their purchase behaviour. Collecting the data can be overwhelming and expensive if you use a program to do so. There are many reasons why you should collect data throughout the customer journey. Personalisation and knowing who your customer base really is are two of them. If you are at the beginning of your small business journey, it might not be a step you are considering right now. Other priorities need to be taken care of first before putting recourses into data collection. If you are at this point, simply address your customer by name in your email marketing.
Addressing your customer by name is easy to achieve and lets you connect to a customer on a deeper level. Address your customer directly when sharing your tracking link, for example. With Siid’s branded tracking page, you can offer your customer to track their order while showing your brand and make sure they remember it. Targeting your customers with personalised mails while giving delivery updates in a branded environment will help immensely push your customer lifetime value.
Stay in contact
No contact with your customers means no more orders from them. They might find your brand while Christmas shopping, but they won't have the active thought of buying from your business. You want the customer to think: "I need a new hoover, so I better go to this specific company" instead of "I need a new hoover, let's see what I find". Suppose they find your business through a coincidence again. In that case, they aren't loyal customers but one-time customers for a second time.
The most straightforward way to stay in contact with your customers is through social media. With social media, you can keep them updated regularly while directly interacting with their comments, likes, direct messages or even their profiles. Social media also gives you a way to reward loyalty by making a VIP Facebook group and offering them exclusive vouchers.
Allow your customers to follow your socials, no matter where in the customer journey they are.
During the post-purchase process, customers check their tracking multiple times. Add your socials and allow your customers to follow your socials with just a single click. Make it as easy as possible for your customers to stay connected by adding your socials to your branded tracking page.
Customer centred approach
It is a given that to keep your customers interested in your product and your brand, they need to feel like you want them to be interested in it. They must feel valued. Put the customer in the spotlight. Especially for B2B businesses, this can result in long term collaborations between you and your customer. Do you sell art supplies? Show off the artworks your customers did with them on social media, put them in the centre. The same goes for your business strategy. Your business decisions must always have your target group and your most valuable customers in mind. Make your marketing and sales effort for them, not for you.
To do so, you need to know more about your customer. And best case, information that they give you. Ask for feedback and provide them with a chance to talk about their needs and wishes. Especially when you have a VIP program with your most loyal customers, you can ask them for more insight. Include them in the most basic decisions regarding your business. This gives you a more defined idea of what your customers want and makes them feel valued and appreciated.
After the fact, and during the post-purchase process, you can set the first mark for your customer to keep you in mind. Keep them updated with your branded tracking page. If other problems are coming along the way, give them extra updates that reach over the generic tracking. Message the buyer to let them know about delays. How frustrating is it, waiting for a parcel to open the tracking page and then see the delivery is delayed? Keep your customer clear about your processes and offer them the best customer experience.
Book a Demo now and boost your customer lifetime value with Siid.