Businesses explore various strategies to ensure enduring growth and success in today’s competitive environment, and evaluating how long-term customer relationships impact the brand can be highly advantageous. This involves looking beyond the worth of individual transactions and instead considering the value that each customer brings to the table over the entire course of the relationship. Tracking and analysing lifetime value is how organisations establish the value of their customer relationships, identify high-value customers, and keep them engaged with the brand.
What is lifetime value?
Lifetime value (LTV), also commonly referred to as customer lifetime value (CLTV), is a metric that represents the estimated total revenue a business can expect to earn from a customer throughout their relationship. Brands can use this metric to assess the cost-effectiveness of on boarding new customers and offering them long-term support.
How is lifetime value calculated?
The lifetime value metric offers businesses valuable insights that can be used to craft strategies for long-term growth and profitability. LTV is a good indicator of whether or not a brand is connecting with its target audience, a finding that can help predict long-term earnings. Projections made when calculating lifetime value also help establish the viability of marketing campaigns by making it possible to predict how long it will take for a new customer to become profitable.
Additionally, knowing the lifetime value across different customer personas offers a guide towards which customer segments should be invested in to reap the maximum profits in the long run. Businesses can then direct more resources towards marketing exercises, product development, and various other operations that focus on these profitable customer segments.
What can businesses do to increase their average customer lifetime value?
Building loyalty among and retaining customers over the long term is critical to increasing a brand’s customer lifetime value. Below are a few steps that businesses can take to keep customers coming back for more and reduce customer churn.
Refine the onboarding process
A simple and user-friendly customer onboarding process goes a long way towards building a loyal customer base. The easier it is for new customers to familiarise themselves with a brand’s product or service, the more likely they are to be satisfied with the experience. Happy customers tend to stay loyal to a brand, explore their other products and services, and even recommend it to their family, colleagues, and friends.
Offer exemplary customer support
One reason for a low average LTV is customer support that falls short of expectations. Customer support plays a critical role in maintaining favourable long-term relationships between brands and customers, which is why businesses must ensure that support teams are properly trained and updated on all products and services offered by the company. It is also a good idea to include members from customer support teams when having discussions about the product, sales targets, and marketing activities to give them clearer insights into customers and their requirements.
Give customers something to be delighted about
Another way to keep customers loyal and boost their lifetime value is to periodically present them with perks and offers that they weren’t expecting. These may include free add-ons, upgrades to a higher level of service, or more. Such positive surprises that add value to a customer’s experiences with a brand are a great way to nurture long-term relationships and increase a customer’s lifetime value.
Lifetime value is a simple metric used to measure the amount of money that a buyer is expected to spend on a brand’s products and services through the entire duration of the relationship. It is a good indicator of customer satisfaction and brand loyalty. Businesses can boost customer lifetime value by ensuring a seamless customer experience, offering world-class customer service, and keeping customers engaged with periodic offers and rewards.