Customer Lifetime Value is known to be an underrated economic metric, when your company provides higher priority to Customer Acquisition on CLV. The Customer Lifetime Value is all about customer retention with unit economics. As per the studies current customers spend around 67% of more retention rate than the new customers. Even a 5% increase in customer retention rates can improve the profits by 25%.
What’s Customer Lifetime Value?
Let us look at the easiest CLV definition –it is the metric that shows you how much profit your business will make from one customer with time. Thus, high CLV means every customer can bring in higher revenue for the company. As every client becomes valuable, this means your business will afford to spend a little more to get the new users & retain the current ones with the help of unit economics.
Let us say you run the classic SaaS service with the monthly billing. We will be using a single customer, who stays with the business for two years and got a subscription plan that is priced at $100 per month.
1. Optimize CLV
It is less costly for the business to retain its customers than to acquire new ones. Still, most of the companies continue investing more money in customer acquisition than retention efforts. Thus, they do get new customers, however, they lose the majority of them along their way.
Luckily, there are many ways you can go of solving it. Increasing the CLV is not the strategy in the cast iron. It is all about keeping this personal & interacting at the human level. You have to identify this kind of user who is the customers, know preferences, the reason they opted you over other competition, or find out other info about them, which will help in establishing the unique connection.
Knowing your CLV can make you imagine, not just about your short-term goal for improving the sales, but also the holistic journey of your customer: where, when, why, how much, or how often do the customers make any purchase? Answering all these questions in the right way can bring the most valuable insights, as well as help you to spot any kind of issues you might not have noticed earlier.
2. Strategic Upselling and Cross-Selling
Something on similar lines for educating the customers & making them use the product, upselling and cross-selling methods are the best way you can make them stick around. And with these, they will not just stick to the product or service but increase the revenue. For increasing CLTV, you may offer bundles, upsells, and cross-sells to the customers. An average cart can increase automatically.
3. Improve Onboarding Process
Optimizing the onboarding process must be the top priority. Poor onboarding experiences will account for over 23% of the churn in subscription-based businesses. You must put together the onboarding process for the business, which encourages the customers to get back for more, therefore increasing the CLV. You have to know whoopzz.