Your customers are crucial to the ongoing commercial success of your business.
This is because, once you’ve attracted a customer enough for them to make their first purchase, you have a golden opportunity: to keep them with you for the long haul. Doing this will help you benefit from an ongoing relationship that goes way beyond a single, standalone transaction.
But how, exactly, do you ensure that customers stick with you for a long time? One way is to increase customer lifetime value (CLV). In this guide, we’ll go through the seven points that govern the best path to enhanced CLV (hint: it’s not just about delivering exceptional loyalty programs!).
Ready? Let’s dive in.
Understanding Customer Lifetime Value (CLV)
CLV is best understood as the entire value a customer will bring to your business. We’re not talking about a purchase-by-purchase breakdown here. Instead, we’re talking about the total value of all such transactions over the course of your whole relationship with a given customer.
When you have an understanding of CLV, you will recognize how important it is to your business health. This is because it’s cheaper to do business with an existing customer than it is to attract new ones. On top of this, existing customers who are part of a customer loyalty program are 83% more likely to buy again from a brand.
This is why so many businesses are now devoting time and effort to increasing customer loyalty, and why in turn there’s predicted to be such enormous growth in loyalty management spend across the globe.
It makes sense to learn from this. Loyalty is clearly big business, and we’re about to see how you can use it in your business.
Key Takeaways
- Customer lifetime value (CLV) is the total revenue or profit generated by a customer over the entire course of their relationship with your business.
- Keeping track of CLV is important to gauge the health of your business.
- Loyal customers have higher CLV—businesses have much to gain from taking steps to increase their customers’ loyalty.
7 Actionable Steps for Increasing Customer Lifetime Value (CLV)
By following these seven steps, you will be in an excellent place to start reaping loyalty program benefits, including an enhanced CLV.
1. Analyze Customer Data
Your very first step is to assemble one of the most valuable assets that your business can get its hands on: your customer data. This can include a huge variety of information, but the data that applies most commonly to customer loyalty usually consists of the following:
✔ What’s the current state of play with your retail performance?
✔ More specifically, what is a given customer buying?
✔ Is there a correlation between customer type (age, gender, occupation, etc.) and product choice?
✔ What other factors might influence the customer’s decision to buy a product?
✔ How many customers go on to make related purchases?
Your retail management system can provide vital data here. It can tell you, for instance, when sales tend to take place, giving you a time-based analysis of your sales, that might be of use in your customer data analysis.
For other insights, such as what persuades a customer to buy an item, you can turn to surveys, including zero-party pop-ups that ask very specific questions about customer experience that day.
Overall, the idea is to not just get a picture of who’s buying what and when, but why they’re doing so. In turn, this will also help you understand what especially appeals to a customer and might influence them to buy in the future.
Actionable Takeaway
Gather the relevant customer data—your management system could come in very handy here. Use tools such as surveys to collect specific feedback to understand consumer patterns and behaviors.
2. Design an effective loyalty program
So, now you have an idea of what drives a customer to make a purchasing decision. At this point, you can think about how to capitalize on this. In short, a loyalty program has to have elements that appeal to your customers. So, it helps to know why customers like your brand, and to build on this.
For instance, let’s say you make the best pizzas ever. OK, you might have one or two competitors who disagree, but you and your customers certainly favor your delicious output over that of others.
Let’s also say that your customer data tells you that people love your pizzas not for reasons of economy, but for reasons of quality. So, it’s not necessarily going to be of primary interest to offer discounts. It might be much better to offer product upgrades to customers who demonstrate the most repeated purchases.
Once a set number of purchases has been reached, you could offer free enhancements such as stuffed crust, gourmet buffalo mozzarella, and fresh basil. This is the kind of loyalty program that will appeal to your quality-loving customers, as well as chime well with your high-quality brand profile.
Actionable Takeaway
Put together a loyalty program using the data you have gathered, especially about what your consumers like. Offer incentives that align with the data to appeal to customers and strengthen your loyalty program.
3. Personalize the Customer Experience
Personalization is huge. Customers tend to like the individual tailoring that it affords, which is why businesses are plowing such a lot into it right now.
By looking at what a particular customer is buying and how they behave on your site, you can set about offering them an experience that is truly centered on them. If they buy a pair of shoes from your site, you can follow up with some messaging pointing out wardrobe items that might go well with them.
With a loyalty program, you can use personalization to shape a program around a particular customer. If a customer likes coffee but not tea, there’s not much point in offering them a loyalty program that’s all about discovering new types of oolong. On the other hand, a ‘coffees of the world’ loyalty program will, in all likelihood, be much more interesting to them.
Actionable Takeaway
Personalize your customers’ experiences to increase satisfaction and loyalty. This can be done on your website and in emails with product recommendations linked to recently viewed or purchased items. More specifically, offer loyalty programs based on a customer’s specific likes to personalize their experience.
4. Boost Customer Engagement
Engagement is what it’s all about. It’s the difference between just hectoring customers and actually interacting with them. Personalization will go a long way toward delivering engagement, but there’s much more you can do.
Other techniques include welcoming user-generated content. If a customer has the opportunity to contribute in this way, they’ll feel more ownership over a process.
Another great way to enhance customer engagement is to hand things over to them. What would they like to see in a loyalty program? Offer them a choice of benefits, so that you and they together produce a program that is relevant to their needs.
Overall, engagement is a win-win. Customers benefit because they get heard. Businesses benefit because they learn what customers want.
Actionable Takeaway
Increase your customers’ engagement by encouraging user-generated content and offering a loyalty program that gives them options so they can choose what they want.
5. Make Use of Technology and Automation
There are very few areas of life and commerce in which tech and automation haven’t delivered huge advances. You can use them to great effect in your loyalty program.
One of the key deliverables is onboarding streamlining. In the past, loyalty programs could be a little clunky and slow to set in motion. Nowadays, with automated processes, you can get a customer involved in a loyalty program much quicker and more smoothly than ever before.
You can send out automated email marketing following a purchase, indicating the benefits of the program, and with a clear CTA so that the customer can get started straight away. In this way, you can accrue subscribers to your loyalty program with minimal effort and use of business resources.
Actionable Takeaway
Use automation to streamline customer onboarding when it comes to your loyalty programs. Send automated emails following a purchase to raise consumers’ awareness about your programs and their benefits.
6. Monitor and Optimize Program Performance
This is where it’s important to know what you want from a loyalty program. If you want to see a growth in total sales, you can use your accounting software and the report features within to give you the figures you need. It will be very clear by looking at data from a specific period whether a program has resulted in an increase in turnover and enhanced sales performance.
If you want to see how a loyalty program is performing in terms of sign-ups from Millennials, for instance, then you can cross-reference sales and loyalty program sign-ups against customer ages.
It’s then down to you to implement improvements where necessary. If you’re seeing disappointing levels of engagement in your loyalty program from those Millennials, then it might be a good idea to engage directly with your customers of that age group to see what might persuade them to join the program.
Subscribing is one thing. You then also need to check on what increased CLV you’re getting from those sign-ups. Are your subscribers actually buying more? If not, why not? Again, ask your customers. They know what they want, usually better than you do.
Actionable Takeaway
Continuously collect data by your aims. With this data, track the progress of your loyalty program and identify areas for improvement. This includes keeping an eye on CLV rates.
7. Promote and Communicate the Program
You may have the best loyalty program in the world, but if you don’t tell anybody about it, it’s a wasted effort. So, do shout about your amazing program.
Use as many channels as you can. Organize your social media output with a scheduling platform. Think about how you’re promoting it on your website. Are there suitable pop-ups at appropriate junctures? Do all your sales staff know everything they need to know about it so they can sell it to customers calling the contact centers? Do your chatbots do enough to push it?
Remember your influencers, too, as they can be enormously helpful in pushing a loyalty program by showing themselves actually using it and benefiting from its provisions. This is a great way of enhancing ecommerce CLV.
Actionable Takeaway
Use every channel at your disposal to spread the word about your loyalty programs and incentives. Schedule your posts so they land on your audience’s pages at the right time, and inform your staff so they know just how to communicate when it comes to the program. Turn to influences for a further boost.
Wrapping Up
Loyalty programs are making a huge difference to eCommerce since they encourage customers to stick with a brand. By implementing them with certain key elements in mind, it’s possible to get the most out of them.
Start with an understanding of who you’re talking to, and shape the experience you’re delivering around them. Make it a two-way process, so that your customers input into the program. Use technology and automation to make the whole thing as easy to use as possible. Then, get on to as many platforms as you can to spread the word about your amazing loyalty program.
With this approach, you’ll find that your business will enjoy increased Customer Lifetime Value. And your customers will enjoy dealing with you, too!
