How to improve customer experience to boost customer lifetime value
When you understand customers, you can put better solutions in front of them. That much is obvious. But when you’re open to feedback, you’ll build better solutions and a better experience. A better experience, as you probably know, builds loyalty. And loyalty pays off.
For one, the chances of converting an existing customer is anywhere from 60% to 70%. With a new prospect, chances drop to between 5% and 20%. On top of that, existing customers almost always spend more — to the tune of 33% more than someone new. In other words, if you can maintain a relationship with a customer, you increase the customer lifetime value, or CLV.
“In a cloud- and digital services-led industry, perhaps the most important indicator of success for a provider is CLV. The higher the CLV, the better your profitability and revenue predictability,” says Prashanth Subramanian, co-founder and executive director at Quadrasystems. “And it’s one of the most important metrics investors consider for valuing your business. Partners with a high CLV demonstrate high customer stickiness, by constantly innovating and staying ahead of the competition.
“Above all, it also means that you’re delivering a great customer experience.”
Delivering Better Value
Knowing CLV is important. It forces you to regard a transaction as more than just transactional. You look at what a sale might mean for the future. Sure, you want more and more customers to buy, but your perspective shifts. You start to consider how much it costs to acquire that customer (and how long it takes to recoup that cost), which often causes you to place greater value on those who have already done business with you.
Of course, to get value, you must give value. You need to deliver enduring value to customers throughout the purchase cycle if you ever hope to maintain that relationship. This can take many forms, from nurture campaigns to cross-selling, but it all comes down to customer experience. That’s where you’ll find the real value.
If you’re looking for ways to improve the customer experience, thereby increasing customers’ lifetime value, give these three tactics a try:
1. Dedicate human capital. Investing in data is one thing; investing in a dedicated team to derive insights from data is something else entirely. Build a team that can pull insights from your data feeds and work with business leaders to drive up CLV. Better yet, ask this team to measure and manage the initiatives so that you can fine-tune your efforts and take remedial action to improve outcomes.
Let’s say you put together a sales excellence team. Analysts on this team could monitor customer engagements and identify opportunities to reach out for customer referrals. If you established a relationship through a particular business line, you could then incentivize a sales manager for that business line to create inroads with relevant decision makers for your other business lines as well.
2. Engage with customers. Happy customers will always be your greatest strength. In fact, I’d go so far as to say it’s a philosophy you should actively promote at all levels in your organization. The problem is, plenty of companies just can’t grasp how to make customers happy — at least not consistently. The key, surprisingly enough, is rather simple: engagement.
Engage with your customer base and work toward building a genuine connection. How you go about this is entirely up to you, but what we’ve found works best is to start small. Pull together some market analysis, develop personas around your target audience, and then pick a persona or two to examine the customer journey. You’ll find touchpoints along the way to connect and deliver a better customer experience.
3. Seek feedback. Talking with customers about their experiences can feel uncomfortable. You’re putting yourself out there, basically looking for validation. But if you want an honest look into the customer experience, go to the source. Ask about the quality of customers’ interactions, your ability to deliver outcomes, and their overall satisfaction levels. You’ll want to encourage open feedback, as you may discover unknown service gaps.
Quadrasystems, for example, uncovered that its renewal reminder process wasn’t robust enough, so the company created a dedicated renewal team. The added support resulted in a renewal rate of 95%. Seeking feedback provided an opportunity to resolve whatever issues the customers encountered on their path to purchase, which helped reduce churn — and improve conversion.
Customer experience and customer lifetime value are intertwined. If you want to improve CLV, you have to improve the experience. It’s as simple as that.