How to Increase Customer Lifetime Value (CLV)

Do you know the value of the individual customers of your brand? 

The cost of attracting new customers varies by industry, but it is growing, particularly in competitive sectors. 

With so much time and effort devoted to attracting new customers and retaining existing ones, it’s vital that you know how much each customer is worth to your business to make sure that you’re achieving the maximum return on investment (ROI).

This is where customer lifetime value comes in. 

What is customer lifetime value?

Customer lifetime value (CLV) is the total profit that a company can expect to gain from a customer over their relationship with the brand - or ‘lifetime’. 

It can be affected by a number of factors, including the type of product or service that your company provides, overall retention rates and the individual costs of products and add-ons. Macro factors can also impact CLV, including the cost of raw materials and fluctuating wage rates and changes in your industry. 

Customer lifetime value will vary from industry to industry. For example, a software company that is continually bringing out new products and storage solutions is likely to have a higher customer lifetime value than a company that makes individual, disposable products.

CLV is an important metric for the long-term success of your business. If it is consistently lower than the standard for your industry, then this may tell you that some element of your sales funnel isn’t functioning properly. 

Consider the example of a brand offering scheduling and calendar solutions. 

With optional add ons, scaling capabilities and regular updates, the brand should have a relatively high customer lifetime value. 

If, however, it notices a low CLV and a low uptake of subsequent updates. This is when it’s time to investigate the sales process to see whether its new products and features are meeting the needs of its real-world customers. 

How to increase customer lifetime value

Boosting your brand’s CLV is a great way of raising overall financial performance while engaging with your customers in a meaningful way. Whether it’s through new products or support services, there are plenty of ways that your brand can work towards improving customer experience, grow the financial value of each customer, and achieve new levels of growth. 

1.   Personalised marketing and segmentation

How do you reach out to your customers? The most successful brands speak to their customers like individuals. They get to know what customers need and what they want from each specific brand. 

Although primarily used through the lens of customer retention, segmentation and personalisation are incredibly useful tools for extending customer lifetime value. These techniques do so by driving hyper-specified marketing campaigns to groups which are likely to make a purchase or enquiry. 

For example, consider a software brand that offers calendar management to customers. It may have three or four different products aimed at different sized clients, as well as add-ons specified by industry. 

Using its customer management system, this brand could analyse its existing customer base to identify those most likely to require a specific add-on. In this case, it might be a booking system that integrates with the calendar software. 

If the add-on specifically targets small traders with a low volume of bookings per day, then this is the audience the brand needs to target within its existing customer base. 

It might do this through an email campaign to the product’s target audience, excluding existing customers that do not fit the required profile. This saves time and resources when it comes to follow ups, and ensures that inquiries are relevant to the specific product. 

2.   Upselling and cross-selling

It’s time to engage your sales team! Customers come to you because your product can solve a problem or meet a need, so they’re likely to already be open to your expertise. 

The period after an initial sale is a great time to upsell - upgrading their original purchase to a more comprehensive product or package - or cross-sell - selling related, supplementary products related to the customer’s initial purchase. 

This can have a great impact on CLV, because these customers have already bought from you. They understand your brand and have faith in your service and the quality of your products. 

This is also a great time to deliver more in-depth demonstrations and pitches regarding additional products. 

When delivering product demonstrations, make sure to provide as much detail as possible. Use screen share or interactive demonstration products to offer as much pre-sale value as your customers need to make a decision. 

The most important thing to remember when upselling or cross-selling is the needs of your audience. Everything that you target towards your customers need to be directly related to addressing their needs, to maximise additional sales. 

3.   Customer service

Customer service has a huge impact on brand loyalty and CLV, particularly in competitive industries.

Optimising your customer service, through training and collecting feedback, can help you to increase customer lifetime value by encouraging repeat custom, and engaging new customers through word-of-mouth. 

This might mean an overhaul of your current customer service to streamline your processes and reduce pressure on your service staff. 

For example, a virtual phone number and cloud-based calling system can help your customer service team to direct calls to the right department more effectively. It also enables access to a shared voicemail system, meaning missed calls can be picked up quickly. 

Great customer service is important in every industry, but particularly crucial in sectors where support is often required. B2C technology companies, as an example, with complex products that consumers require help to operate or repair, can be seriously damaged by poor customer service.

4.   Loyalty programs

Think about a loyalty program of which you are a member. Why are you a member? What benefits does that program offer which keeps you returning to that brand?

Most effective for retail and B2C brands, loyalty programs leverage brand loyalty and consistency at meeting consumer needs. 

For example, there are many different retail brands that sell groceries - and many of these offer loyalty programs. Aside from the cost of merchandise and other factors out of our control, such as location and opening hours, think about why consumers choose one brand over another.

Often, the answer lies in loyalty and reward programs that keep the customer coming back, extending CLV to a potentially large degree. 

Loyalty programs may provide:

• Personalised offers
• Price reduction on certain products
• Points that can be redeemed on future purchases

Advice and exclusive content on existing products

The aim of a loyalty program is to continually engage new and existing customers with new technologies and innovations, encouraging repeat purchases and long-term custom. 

5.   Subscription payment models

A subscription payment model is a mode of payment in which a customer pays a regular amount each time period for continued access to a service. Chances are that you already use a subscription payment model as a consumer, for services such as media streaming or membership to a gym or health center. 

The major benefit of subscription models to companies is that they have a consistent, constant stream of income. 

To maximise impact on CLV, brands might offer a reduced subscription cost in exchange for a minimum commitment of 12 or 24 months. 

Subscriptions are highly effective as a primary payment model. However, you can also offer a subscription alongside one-off purchases, to continually engage customers and raise CLV. 

For example, alongside the purchase and installation of phone equipment, a communications brand might offer a monthly subscription to an auto dialer service, to help with automating external comms and engagement with customers. 

Once you’ve signed a customer up to a subscription, you then need to deliver expected value and service quality in order to encourage renewal. 

6.   Re-engage existing customers

Your CLV strategy shouldn’t only focus on attracting and engaging new customers. Re-engaging existing customers with new products and support for their existing products and services can have as much of an impact on CLV as onboarding new customers. 

These are just some of the ways that you can communicate with new customers to re-engage them with your brand and create awareness of new products:

• A dedicated email campaign
• An exclusive launch event for existing customers 
• Social media campaigns and paid ads targeting previous customers
• In-app announcements - particularly if you have a members’ area or app with a login feature

Not only will existing customers appreciate the continued contact and dedicated communications, they will also likely return to your business to make another purchase if they had a great first experience. 

For this reason, your first impression with customers is a crucial element of CLV. Investing in delivering on customer experience from the very start means investing in growth and boosting customer lifetime value. 

Achieving growth with CLV

Now that you understand how to calculate and increase CLV, it’s time to implement your strategy. A steadily increasing CLV can help you to achieve unprecedented long-term growth, because it centers the experience of your customers and allows you to focus on meeting their needs as an integral part of your marketing strategy. 

To achieve this successfully, you need to approach CLV holistically. It should be part of every customer interaction, with the goal of engaging customers at every stage of the sales process and beyond to encourage retention, subsequent purchases and an overall higher CLV.