How to Increase Your Customer Lifetime Value
One of the most powerful ways to boost your profits is to increase the amount and frequency which your customers spend money with you. Acquiring a new customer is expensive (both financially and in terms of time) so once you have one you need to look for multiple opportunities to sell to them over a period of time. If you flinch at this suggestion, you need to overcome your belief that selling is sleazy – it’s probably holding you back in business and in life. Think of it as serving your customers by delivering value that can improve their lives. By finding ways for your existing customers to spend more/buy more frequently, you can increase your profits many times over with less effort than you think.
How to get the most out of your existing customers
- Never stop developing solutions for your audience. Never stop asking your customers, “What are you struggling with?” If you know what they need help with, you know what products to create. Customers will appreciate you solving their problems and that boosts both profits and loyalty. Keep doing research; conduct surveys; ask questions. Knowing what they want is key to delivering products your customers will love.
- Upselling. Upselling means getting customers to spend more on an item than it actually costs by offering extras. It might be a small amount, but it works really well if the strategy is used on each customer. Starbucks, for example, does this very well by offering customers various treats and snacks in addition to their coffee order, and in many cases, customers who weren’t considering that item earlier purchase it together with their drink. Similarly, Amazon has its “Customers who bought this, also bought…” as well as bundling items that complement each other. The strategy can be applied both generally and specifically to each customer. The more customer-specific it is, the more chances you have of getting them to spend extra money on additional products or services.
- Appreciate your customers. It might very well be that while customers like to buy certain items from you, they sometimes buy the same items from other retailers because it’s more convenient or they can get a better deal, or simply because the competition markets better. This is called divided spending, and you should try to avoid it by having your customers buy all relevant items from you. The best way to do so is to ensure that your products are always of the highest quality; your customer-service is impeccable; and your customers know that they are appreciated (e.g. offer birthday discounts, no-quibble refunds, loyalty programs etc.) If a client feels respected and valued, she is much more likely to buy from you on a regular basis. Your retention levels will increase; the amount your customers spend with you and the frequency with which they buy.
- Customised sales programs. Each customer can be a source of profit beyond what you’d get from a regular purchase – you just need to find the right customer service approach in order to maximize those profits. Finding the best approach for each customer is equal to micromanaging that customer. In addition to the generic marketing – e.g. your website, social media presence etc. you need to also engage in segment-based marketing targeted towards members of each marketing segment. These segments can be location-based, age-based, distance-based, and so on. Most businesses stop there, but in order to maximize profits from each client, we recommend that you also engage in personalized marketing targeted towards individuals based on their past purchases and other information you have on them. The customized sales programs can include discounts in the customer’s location, “double points” on items they’ve previously bought from you, and so on.
- Recover lost customers. Unfortunately, sometimes customers are dissatisfied with your service and leave you. It is, however, worth the effort to try and recover them. Start by apologizing for any grievance you might have caused and offering a gift for stopping by, based on their purchase history. Once you get an affirmative response, present them with a customized list of offers they might find appealing. Don’t forget to tell them all about how you’ve improved since they last visited you – again, be as specific to them as possible, but don’t leave out general information.
Prevention is better than cure. We’re all customers. What has made you take your business elsewhere in the past? The primary reason why customers leave is they feel disrespected. Disrespect can take several forms: a poor-quality product; poor customer service; rudeness; being treated unfairly; not having their problems dealt with swiftly and so on. Yes, some people are never happy and sometimes you need to “fire customers” but the vast majority are great and just want to be treated as you would wish to be.
- Referrals. The most effective referrals occur mostly by means of “word-of-mouth”. You might sometimes get lucky enough for a happy customer to refer you to someone without any prompting from you, but you might get even more referrals if the customers know that you want them. Spread your message on your website, include it in your marketing e-mails, confirmation e-mails, etc. Or just ask a satisfied customer for a referral by reaching out to them individually or making it easy for them to tell others about your products on social media.
- Improvements based on client feedback. It goes without saying that the more you listen to your customers and implement their suggestions and feedback into your products and services, the more appreciated they feel and the more likely they are to return to you. Don’t bury your head in the sand, afraid of bad feedback. Send out surveys and emails and ask your customers how you can improve. It can be a win-win situation: you can discover problems early on and resolve them (and so keep hold of customers) or you can find delighted customers and you can use their feedback (with permission) as testimonials in your marketing material.
- Maximizing your profits from existing customers to the fullest extent is possible provided that you know your customers well (e.g. the problems they want solutions for); you know their behaviours (e.g. what they have bought in the past and what they typically buy from you) and you don’t see selling as a sleazy activity.
- Customers are more likely to return/remain if they feel appreciated and are treated fairly and well.
- Don’t be afraid to ask your customers for referrals.
- Send out an email to your existing customers with one simple question, “What are you currently struggling with in [your chosen industry/topic]?” That could be your next product.
- Are there natural product bundles you can create? For example, if you offer Photoshop training, a natural complement to that may be to create a product teaching users how to restore damaged photos or helping non-technical artists use the software. The goal is to have customers buy more from you, more frequently, at higher prices.
- Test your product ideas with a landing page. It’s a powerful way to build an email list of pre-sold customers and to test the viability of your idea without spending time or money creating something no one wants.