Why improving customer lifetime value (CLV) is so critical for small businesses
Customer acquisition and onboarding can be expensive. That’s why increasing customer lifetime value (CLV) and getting the most out of every customer is so critical to the success of small businesses. In order to present your business to potential customers and convince them to try your product or service, you need to spend money.
Transforming single purchases into a regular customer base is more profitable than finding a constant flow of new infrequent consumers.
Small businesses that have a repeat customer base have a much higher likelihood to succeed. In order to improve your average CLV you need to get more customers making repeat or additional purchases.
Benefits of increasing CLV
Put simply, higher CLV leads to higher revenue. When you get more value out of each customer, your business ends up making more money, becoming more efficient and reduces spending on customer acquisition.
CLV is even more critical for smaller businesses that work on a smaller scale, where every customer matters.
Beyond revenues, increasing CLV can improve other aspects of your business by:
● Generating customer loyalty and word of mouth marketing.
● Helping identify ideal future clients based on existing CLV data.
● Ensuring a more predictable cash flow compared to relying on more unpredictable one-time customers.
So how do you go about designing the right customer experience to improve CLV? Here are five tips:
1. Simplify payments
When customers make a purchase, the payment process should be as easy as possible. You want to eliminate every potential barrier and provide multiple payment options.
Whether it’s creating a good experience for receiving payments online or a transparent checkout process where what’s purchased is clearly stated, clients are much more likely to stick around if payments are simple.
This can be especially true for B2B payments, where transaction values can be higher, and customers may need to carefully manage their cash flow or get services on credit.
Offering customers an easy payment experience and multiple payment options like credit card, checks and ACH bank transfers are a great way to help increase CLV.
2. Prioritise onboarding
There’s nothing like a first impression and they really can go a long way. Onboarding is the process of bringing new customers into your business and setting them up for success with your product or service.
Much of a new customer's experience with your company will be defined during the onboarding process. While you can’t guarantee high CLV during the onboarding process, you can certainly cap its potential.
With excellent onboarding processes, you’re laying the groundwork for a long and fruitful relationship on both sides.
Going the extra mile, being as helpful as possible, and simplifying the onboarding process can help start the relationship off right. This could include personalised onboarding options and offering multiple communication channels.
3. Develop customer reward programmes
Reward programmes for long-term customers help retain clients and improve CLV.
They can range from a loyalty programme with discounts after a particular purchase or another type of incentive such as greater resources assigned to their account like VIP customer service, faster delivery and early access to new products or services.
With the right balance that doesn’t significantly affect profit margins, reward programs that recognize loyal customers can generate great results.
4. Maintain high customer service standards
It can be easy to shift focus to acquiring new business and neglect long-term customers.
However, to maximize CLV, you can never take repeat customers for granted. This means developing and maintaining excellent customer service over the entire customer life cycle.
It’s important to ensure that every customer feels heard and valued by your business. Where applicable, offer personalized services, provide prompt communication, and implement fair and reasonable return and refund policies.
Excellent customer service makes consumers happy to interact with your business which makes them more likely to come back and spend more.
Plus, good customer service can help boost the value of individual sales. For example, research by Salesforce found that 67% of people were willing to pay more if it meant better customer service.
If you’re doing a lot of this over the- hone or through the computer, quite a bit of technology helps with this process. Multiple suppliers, such as Call Handling, specialise in this, and it’s worth looking at what you can use and implement to make things easier.
5. Upsell to increase value
Getting customers to spend more and increasing the average value of their order is a crucial way to improve CLV.
From a waiter recommending an expensive bottle of wine to e-commerce websites offering related products upon checkout, upselling or convincing customers to spend more can be seen across every industry
When done right, upselling is a non-intrusive way of nudging customers to spend more. However, it can generate a negative response when too explicit or forced. Customers feeling pressured into spending may choose not to spend at all.
By finding the right upselling balance that demonstrates the added value of a more expensive service or showcasing other possible purchases, you can successfully boost CLV without turning customers off.
Boosting CLV to ensure success
Maximising CLV is key to running a successful small business.
Constantly attracting new customers is a significant challenge, even with a great product and innovative marketing ideas. Business is more profitable when you can rely on a base of repeat customers providing recurring revenue.
With operations and strategies designed to improve CLV, you’ll see an immediate impact on your bottom line. Plus, satisfied, loyal customers are much more likely to tell others about the qualities of your business.
