A bird at hand is worth more than two in the bush. There are fewer places this old adage is more apt than in the business world. Did you know, for example, 65 percent of a business’s sales come from existing customers?
As a business owner, you certainly know that it’s cheaper and easier to sell to a current customer than to a new one. But how do you maximize the value of that existing customer while they’re still loyal to your business?
You’ve come to the right place for practical advice. Here’s how to increase customer lifetime value (CLV).
Run a Loyalty Program
In a market where consumers have a ton of options, turning a new customer into a loyal one is easier said than done. Selling them a superior product or offering irresistible discounts alone isn’t going to cut it. A loyalty program can give you an edge.
You’re probably asking: but doesn’t almost every other business have a loyalty program?
That’s true, but it doesn’t necessarily mean the programs are working. You need to focus on designing a program that appeals to the unique needs and consumption behaviors of your customers.
With an effective loyalty program, you’ll be in a better position to keep customers for longer. If you can extend the average time a customer stays with your company from 1 year to 3 years, for instance, you’ll do more business with them. So, if a customer spends $500 on your business in a year, the amount will increase to about $1,500 over a 3-year period.
If you need expert help designing a customer loyalty program, reach out to service providers like kobie.com.
Expand Your Product Offerings
Ever wondered why your favorite smartphone brand offers a whole lineup of telecommunication products? If you’re an Apple customer, for example, you’ll hardly ever need to look outside the brand for your device needs. That’s how the company gets you to spend more money on them.
Similarly, a clever way to maximize customer lifetime value is to expand your product range. However, don’t just add new products for the sake of it. You must be strategic about it.
For example, if you’re a toothpaste company, you want to add products that are complementary. What else could a consumer want when they’re shopping for toothpaste? Mouth rinse, perhaps?
The goal is to make your business the go-to solution for your customer’s specific needs. The wider the range of products they can buy from your company, the more money they’ll bring.
If your business already has a line of products, selling some of them as a bundle can potentially increase CLV.
Here’s an illustration:
Let’s say you’re a landscaping company offering the following services:
- Lawn mowing -$100
- Yard cleaning -$100
- Weed control-$100
- Lawn mowing and yard cleaning (bundle) – $150.
Now, although a customer can purchase each service separately, bundling lawn mowing and yard cleaning gives them some food for thought.
According to the psychology of product bundling, bundling increases perceived value. A customer who usually comes to you for lawn mowing but never yard cleaning because they can DIY would start considering getting the bundled service.
After all, aren’t they getting the yard cleaning service at half price? Well, in reality, they’re spending $50 on top of their regular spending! Plus, you’ve got them to purchase a new service in the process, albeit at a reduced price.
Of course, before bundling, you must crunch the numbers and ensure you’re keeping your margins.
Run a Referral Program
Over 90 percent of consumers trust product/service recommendations from their peers. Are your existing customers telling their friends and relatives about your offerings?
If not, a little motivation goes a long way. Running a referral program gives your customers an incentive to recommend your products and services to their peers.
Just like designing a customer loyalty program, you need to think about your customers when designing a referral program. Personalize it.
You can start by gathering customer feedback on the kind of rewards they’ll like to get for their referrals – and give them just that. It’s also important to consider the nature of your business when determining how to reward your customers.
For example, if you’re a travel agency, it doesn’t make much sense to offer cash rewards. Leave that to credit card companies and other financial services providers. An ideal reward for your customers would be a discounted price (say 10% off) on their next travel booking.
Go Big on Rewarding Your Biggest Spending Customers
Your customers aren’t equal – at least when you consider their spending power. There are big spenders, small spenders, and the in-betweeners.
Of course, you must serve them all equally, but when it comes to customer lifetime value maximization, rewarding the biggest spenders more can have a bigger impact. It’s easier to get a big-spending client to spend even more than it is to get a small-spender to increase their spending.
You just need to give those big spenders a good reason to spend more. For example, you can send them personalized gifts or offer them exclusive discounts.
How to Increase Customer Lifetime Value Made Easier!
A simple business fact is customer loyalty doesn’t last forever. Changing consumer needs and an inherent desire to try out new things make it difficult for customers to stick to one brand.
Thus, one of your key objectives as a business owner should be to make the most of your customers while they’re still loyal to you. With this guide on how to increase customer lifetime value, you now know some of the best strategies you can deploy.
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