‘Invest in your customer’s lifetime value to ensure your company’s future and growth’, says PayGate.
Did you know that it costs five times more to attract a new customer to your online store than it does to keep an existing one? This is according to research undertaken by Bain & Company, a global management consulting company, that asked “what was the ‘Prescription for cutting costs’?” The answer lay in the customer lifetime value and in building loyal relationships that translate into cost savings and company growth. This research also found that increasing customer retention rates by as little as 5% can boost profits by 25% to 95%. The secrets of loyalty leaders lie not in their laser-like focus on customer acquisition (44% of companies according to eConsultancy) but in their commitment to customer retention.
Research spanning continent and country has found that one of the overarching trends for 2019 is in the exquisitely fine balance between customer retention and acquisition.
Instead of only pursuing elusive new customers, what you need to do is make your existing clients happy. Fortunately, there has never been a better time for you to do just that. As Sridhar Ramaswamy, Senior VP for Google Ads, said: “Consumers have never been so hard to please and marketers have never had as many opportunities to please them.”
What you need is to invest into tactics that improve customer experiences, enhance their engagement, boost their loyalty, and allow you to really drive their lifetime value.
What is customer lifetime value?
This is defined as how much any given customer is worth to your business over their entire lifetime. According to Hubspot, you can calculate any customer lifetime value by following this metric: calculate average purchase value, multiply it by the average purchase frequency rate, then multiply that with the average customer’s lifespan.
This can be achieved in three distinct ways: Inspiring them to buy more per order, getting them to buy more often, and reducing the costs you incur in serving them.
Increase the average order value
One of the three pillars that upholds customer lifetime value is the ability to get customers to spend more when they shop with your business. Here are five smart steps you can take to boost your average order value.
1. Upsell your products
When you sell a variety of different products that complement one another, upselling them is one of the easiest ways to raise your customer lifetime value. It entices your customers to buy a more expensive version of a particular product or service by showcasing how it can improve their experience, quality of life, or product enjoyment. Use upselling to take your customer on a journey from investing into a basic offering all the way through to a more comprehensive solution.
2. Cross-sell your products
Like upselling, cross-selling is an art. With this technique, you can sell similar products and services as a layer of additional value or as a way of enhancing their experience. A great way to cross-sell is to create product bundles that group different products together in innovative ways, potentially getting customers to look at the products in a different way.
If you collectively sell them for a lower price than if you sold them separately, then you not only get their buy-in from a value point of view, but you potentially engage them with a new range of products that they may like and buy again. Another option is to use an app that allows you to recommend similar or complementary products when a person is on a particular product or page. This works very well in fashion and décor.
3. Offer discounts on a minimum purchase
Another great way to engage with your customers is to offer them a discount if they spend a minimum amount, such as R500. The figure can vary dependent on what you need to make up in lost margins. You could also consider offering your customers free shipping if they spend more than a certain amount – this encourages them to add more items to their baskets.
4. Consider a limited time offer
Shoppers tend to think about their purchases, often abandoning their carts when they think about the purchase too much. A nice way to overcome this pause is to offer them a discount for a short period of time. It creates a sense of urgency that encourages them to buy more items at once. For example, a marketing campaign that says, “Get 40% off on all products until Saturday!” will compel people to act immediately.
5. Try volume discounts
Offer your customers a reward for their loyalty with a discount on bulk purchases of the same products. Just remember, that in as much as this excites and engages your customers, you need to make sure that your discount value attracts customers but doesn’t destroy your profit margins. Discount with care.
Increase shopping frequency
Your next step is to get those customers back in your store as soon as possible. Here are five steps that you can take right now, to ensure your customers come back.
It has never been easier to personalise customer communications, nor has it ever been more important. Personalise content, special offers and promotions. Talk to your shoppers or customer segments, ensure your communication is relevant, and leverage dynamic content on your website and in your email marketing. Let your customers always see the offers that are relevant to them. Let them feel noticed and heard.
Reward customers with exclusive offers and tailored loyalty programmes that are just for them, your most loyal customers. Invest into frequent shopper programmes that are easy to use and become engaged with, and that make your customers feel special.
3. Customer communication
Newsletters are a powerful tool in the email age. They allow you to target specific customers and segments to add value that they want and respect. It isn’t always discounts, it can be features, customised content, resources, insights, trends – anything that your shopper values. You can also use SMS systems to nudge customers into a purchase, although it should be used carefully as few things chase customers away as effectively as spam.
4. Re-engage with customers
Digital re-marketing is another clever tool for catching hold of the attention from shoppers who have visited, viewed products, and left. Using smart marketing tools that can identify where the shoppers engaged with your – social media, website, email – you can then create specialised ads that promote the products they viewed.
5. High-end customer service
Few things say ‘I care’ than customer service that goes the extra mile. Use every communication touchpoint you have with your customer to build brand loyalty and trust. Engage with people, develop a relationship, and always exceed expectations. This can be through free returns, exclusive online content, personalised messages in packaging – be as inventive as your brand allows.
Reduce your costs
Finally, you will need to invest into methodologies that help you keep your costs down. When your business is more established, explore solutions such as e-commerce automation, software that streamlines manual tasks, automated marketing tools and more. Many e-commerce platforms offer these tools as part of their services, but many you can add on to your online business as your budget allows. These tools minimise your admin so you can focus on maximising your growth.
When you value your customers, it will show in your revenue growth. It’s a matter of offering shoppers precisely what they need, and offering them what they want before they even know they want it. Provide high-end support, seamless and customised experiences, and stunning product offerings and you will see your customer lifetime value grow alongside your business.