Attaining new customers and creating fresh leads is an inevitable need for any business to grow. Perhaps this is why businesses spend a fortune on attaining new customers.
But did you know obtaining new customers may cost you up to 5 times more than retaining your existing customers?
Not just the cost incurred, even the success rate of selling to new customers is much higher than new customers.
According to a report, the success rate of selling to a new customer is around 5-20%, while the same for prevailing customers is 60-70%. Another report reveals that 65% of sales come from existing customers of a business.
Acknowledging the facts, it’s clear that a major chunk of sales is through prevailing customers. Hence, the need is to prioritize retaining your customers over attaining new ones.
Businesses calculate the lifetime value of a customer to predict the revenue it can generate from an individual customer account throughout the relationship tenure. It is calculated to identify and list the most valuable customers for a company.
Calculating a customer’s lifetime value is important as it directly impacts revenue, enhances customer loyalty, targeted approach, lowers customer acquisition cost, and much more.
This is done with a simple formula, which is;
Customer LTV = Customer Value X Average Customer Lifespan
Customer Value = Average Purchase Value X Average Number of Purchases
Now that we have an in-depth idea about a customer’s lifetime value and the formula to calculate it let’s learn ways to increase it.
While numerous factors directly or indirectly impact a customer’s lifetime value, experts believe customer retention is the key factor among all of them.
If you, as a brand, can successfully boost your customer retention ratio, the lifetime value will gradually increase. Hence, it is important to prioritize improving the customer retention ratio first.
Acknowledging this, let’s learn about ways you can improve your customer retention to increase LTV. Here are some key ways to improve customer retention;
1. Constantly Interact and Engage
The most important way to retain your customers is by interacting and engaging them. Don’t forget the two might sound interlinked but have a thin line separating the two. Ensure being available on platforms where your customers often spend their time and use the same to further resolve their queries and share new offers with them. Over time, brands impeccably grew their commerce by utilizing the same.
A recent example to back this can be Boohoo. While businesses across the globe were suffering from losses, Boohoo’s sales were up by 44% in the May 2020 quarter.
From creating a dedicated hashtag #boohooInTheHouse to relate to women’s expectations while being at home during the lockdown. The list includes nail art classes, Q&As, live DJ sets, and much more. The brand left no stone unturned to make its way to the target audience.
Here’s a post shared by the brand on Instagram:
Source: Instagram boohoo
Similarly, gaming site FreeCell Challenge would send regular emails with leaderboard stats and individual scores, which increased the number of FreeCell games played per user. Simple tactics like email and social media keep your brand presence and help drive engagement to improve your LTV.
2. Provide Personalized Recommendations
Share something with your customers that they didn’t know they needed. The sentence might sound a little confusing, but let’s take it with an example.
You might have noticed online shopping sites in particular that share ‘products you may like’ not just while buying or being on the portal, also through emails. This is a sound way to engage your customers. Not just besides boosting your retention rate, it also helps in increasing the lifetime value of your customers and eventually boost revenue. I would like to share an example of this, which I liked the most.
3. Ask Suggestions From Your Customers
You don’t just have to be the one that keeps suggesting the need is to create a two-way channel. And anyway, your customers are the best source to educate you on what they need. This can be done by organizing surveys and providing them feedback forms from time to time.
However, don’t overdo it as it may intrude on the personal space of your customers. Hence, the need is to strive for a balance and ensure that the suggestions are collected without bothering your customers.
The survey can be about your product performance, new feature suggestion, customer support, and feedback on something you are building on your product. Taking feedback and suggestions from your customers increases the trust and credibility of your business.
Besides, you must also ensure taking necessary actions after closely analyzing the feasibility of suggestions shared by your customers. This will further increase the chances of getting a response.
Well, sometimes you don’t have to ask for suggestions from your customers. They bring some exciting insights into your product that you would have not even thought of.
Here is an example of a Tesla customer asking for a software update to Elon Musk, which he is gracefully accepting and promptly responded to implement it on all the Tesla Cars.
4. Launch Upgrades
This one’s an amalgamation of numerous factors, including upgrades in dedicated offers and your online portal. You must reward your loyal customers from time to time. That’s one unmatched way to keep your customers trusting you. Besides, you must also focus on upgrading your product with new features.
The Operandi involves gaining the confidence of your prevailing customers. Also, this will positively leave an impact on attracting new customers. Acknowledging this, you can not just retain your customers using the strategy. Also, you can attain new customers.
However, just launching upgrades and new features on your online product is not enough. You have to show your customers what’s the value in it. It would be unfortunate if customers are churning because they don’t know how to use a product, which is the case for complex B2B products.
Product marketers use webinar software to host product onboarding or product update webinars. This way, they make sure their customers are fully utilizing the product and getting the most value. Each customer who realizes that value will not churn but instead increase your LTV.
5. Omnichannel Customer Support
According to call center and customer support statistics, 58% of customers rate customer service as an essential factor that affects their choice of a brand.
You need to ensure being available for your customers as and when they need it. And this shouldn’t be confined to the support executives on your website or call. With the growth of social media platforms, serving your audience has become more crucial. Customers look forward to having answers to their queries and resolution to concerns on these social media platforms.
To respond to your customers as quickly as possible, it is a good idea to use Facebook Messenger for customer support. You can automate replies in Facebook Messenger by using a chatbot. This way, you can ensure 24hr customer support, even while your team is not around.
According to a report, 93% of customers believe CEOs engaging on social media platforms play an invincible role in gaining customers' loyalty and sharing the company’s values.
Here’s another example of how Elon Musk uses social media (especially Twitter) to stay connected with its customers.
Experts say — “people don’t buy products; they buy experience”. The quote perfectly fits all industries in the growing digital era. There’s no secret code to rule the market and surpass the competition. In fact, it’s a combination of numerous strategies and actions that deliver the results.
Retaining your customers to increase LTV is a part of it. While this may sound like rocket science to some, in layman's terms, you just need to wear the shoes of your buyers and deliver them what you may expect being in their place. Simple!! Isn’t it?