How to Double Your Customer Lifetime Value


Customer lifetime value is one of the most important metrics in any business, for one simple reason:

Customer Acquisition Costs < Customer Lifetime Value = Profit and Growth

As a marketer or business owner, you know all the statistics:

➤It costs seven times more to acquire a new customer than to retain an existing one.

➤Roughly 40 percent of a company’s revenue is generated by about 8 percent of its customers.

➤A typical lead has about a 1 to 2 percent chance of converting, but you have a 60 to 70 percent chance of converting a repeat customer.

➤Repeat customers spend more (by some estimates, as much as 57 percent) per transaction than first-time buyers.

➤Loyal customers refer twice as many friends and colleagues as new customers.

Given that everyone should understand how important loyal, repeat customers are to a business’s success, it’s somewhat surprising that the average company spends about 80 percent of its marketing budget on acquisition and only 20 percent on retention.

Your loyal, repeat customers, those with high CLTV, are the key to revenue and growth; in many industries, CLTV is a more important metric relevant to a business’s success than even profit from individual sales.

So…what can you do to boost your retention rates and increase your CLTV? Take a look at some of these tips and tactics to see which you can apply to your business.

1. Segment Your Customers



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Your customers buy from you for different reasons; they have unique needs, pain points, and concerns. A marketing approach that treats them all the same is bound to fail, or at least not be as effective as it could be. Wondering why you should segment?

?to identify your most profitable customers

?to better focus your marketing efforts

?to improve your customer service

?to personalize the customer experience

?to develop better products and customize features

Depending on your industry, you can segment your customers in a number of ways. Here are some examples to help you drill down into your customers:

Who? (Demographics)





?marital/family status


?urban or rural

?ZIP codes

?city market size (New York versus Colorado Springs)



What can cover any number of possibilities, from what they’re past behaviors were to what motivates them, even what they think.

?number of purchases/average transaction size

?business versus pleasure

?professional versus amateur

?DIY versus looking to hire a contractor

?thrifty versus impulse buyer

?active versus occasional user


?motivated by life event (marriage, birth of baby, purchase new home)

?seasonal (holidays versus year-round, for example)

?periodic (recurring contact lens purchase, for example)

Once you choose the segments that make the most sense for your business, you can then assign a value to each and prioritize your steps toward more targeted marketing.

2. Personalize Your Marketing


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Segmenting is a good first step toward personalizing your customer experience; you can tailor content that addresses their interests and needs. But personalization can and should go beyond that. It can start as soon as you collect enough data—look how quickly your recommendations are updated as you browse Amazon’s website.

So how can you personalize your customer experience if you’re starting from scratch?

Use triggered emails. Triggered emails have an open rate 152 percent higher than normal emails and there are plenty of affordable specialized tools for implementing triggered email campaigns.

In e-commerce, the abandoned cart email is a classic example of how this works, but you can choose just about any behavioral triggering event, such as viewing a particular web page, not completing a step in the on-boarding process, reaching a milestone, expiration of a free trial period, etc.

Customize your website experience. In many cases, this is as easy as asking visitors up front what their reasons are for visiting your site, subscribing to your service, or using your product. A wedding planning site might ask whether the visitor is the bride or a friend or relative of the bride and then tailor content accordingly.

If you want to step up to a more sophisticated approach, you can invest in dynamic website personalization technology which lets you change the content, offers, and messaging based on virtually any criteria you select. Pardot and Marketo are two companies offering dynamic personalization for both email and web content.

3. Provide Excellent Customer Service

It’s impossible to overstate the importance of customer service in retention, and ultimately CLTV. Take a look at these findings from a survey by Zendesk:

?Customer service is the #1 factor in determining a vendor’s trustworthiness.

?More than 62 percent of people bought more after they had a good customer service experience.

?Over half of B2C buyers and nearly two-thirds of B2B customers ended the relationship with a business after a bad customer service experience.

?Nearly all (95 percent) of your customers will tell other people about a bad customer service experience; 87 percent share a good experience.

?Customers remember and are impacted by a good customer service experience even two years after the fact.

Good customer service is more than just a friendly voice on the phone or a helpful chat session; it’s also proactive and data-driven. Suppose your data show that your SaaS customers who have three or more interactions with the help desk in the first 30 days maintain their subscriptions longer, buy more features/options, and have a higher CLTV. The smart move would be to adapt your on-boarding processes and materials to encourage early contact with your support team, whether through in-app popups, automated email series, SMS text, or other method.

Good customer service means looking for ways to delight your customer, as well as solve his problems. Some examples:

?Making returns simple and hassle-free, such as including prepaid return shipping labels.

?Providing attractive, secure packaging and multiple shipping options.

?Offering value-added extras such as a mobile app or utilities.

?Building a useful and easy-to-use knowledge base customers can use to get helpful tips or information about using your products, and to troubleshoot problems.

?Adding virtual tools such as 3D room planners or “try-it-on” wardrobes to your website to help customers make purchasing decisions.

?Giving customers a service or feature they can’t get from your competitors.

?Responding to customer input to make upgrades or changes to your products, policies, or services.

4. Look for Creative Opportunities to Upsell and Cross Sell

Airline booking sites are masterful at upselling and cross selling; airlines pocketed over $36 billion in add-on fees for upgraded seats, priority boarding, and baggage allowances according to a study by Amadeus Group. The magnitude of their cross-selling with partner hotels, car rental agencies, and other vendors is much higher.

There are two secrets to increasing your success at upselling: Price anchoring and the power of default. Here’s how they work:

Price anchoring refers to the phenomenon of offering an add-on product or service with a price significantly lower than the main product driving the transaction. In the airlines example, if you are already shelling out $500 for a ticket, a $25 fee for priority boarding or $50 for a seat upgrade doesn’t “seem” as expensive as it does when you show up at the gate and have to get out your credit card for a whole new transaction.

The power of default comes into play when your customers have to opt out of an option as opposed to consciously adding it in. In the case of an airline, for example, flight cancellation insurance might be automatically added and the customer has to manually uncheck a box to remove the added service.

5. Re-engage Inactive Customers

Again, it costs seven times as much to get a new customer as it does to retain an existing one, so you should never let an inactive customer go without a fight. Here are some tips to reactivate them:

?Start by identifying a reasonable metric for “inactive.” The purchasing cycle for a cell phone is different than the one for premium dog food, so choose a realistic time frame for re-engagement.

?Use past activity or purchases to drive engagement. Offer a customer a special price on a product they bought from you in the past, for example. Of note: Emails that displayed a specific dollar amount or percentage off in the subject line had the best open rates.

?Ask the customer for feedback. In many cases, a customer who is no longer actively engaged has a specific reason for staying away, and will be more than happy to share it, especially if it’s a negative one. This gives you an opportunity to both to resolve and issue and potentially win back the customer, and learn about potential problems in your business you need to address.

6. Reward Your Loyal Customers

A good loyalty reward program should do more than give special perks to your best customers—it should also incentivize them to buy even more. To do that, however, it has to provide real value and be easy to use and understand.

According to the 2015 Colloquy Customer Loyalty Census, the average household belonged to 29 customer loyalty programs, but only actively participated in 12 of them. That means over half of those loyalty programs are basically a waste of time and money for the company, and certainly providing no value to the customer.

So how do you reward your loyal customers in a mutually beneficial way? Here are some ideas you can adapt to your business:

Get hyper-personal. With today’s business intelligence and marketing technology, it’s possible to deliver a highly customized system of loyalty perks. A restaurant, for example, can integrate its POS technology and app-based loyalty program to track everything from favorite menu items, past purchases, average number of cocktails ordered—everything.

That information can be used to push personalized perks and rewards to the member’s phone. Imagine greeting a regular customer when he enters the dining room with a message like, “Welcome back, Dan! Congrats on your 10th visit. How about a free glass of your favorite cabernet with your meal or a slice of chocolate cheesecake?”

Offer non-monetary perks and rewards. This is an especially effective tactic with millennials, who value intangible rewards such as skipping the line at checkout, invitations to members-only events, access to exclusive content or products, or the services of a shopping concierge. In the restaurant example, you could offer invites to the chef’s table, a meet-and-greet with the chef, or even access to a members-only dessert or wine list.

Take a tiered approach. Give customers something to reach for by adding new or better benefits as they reach certain behavior targets such as number of referrals, number of visits or purchases, or total dollar amount spent. You can tie this to a points-based loyalty program by letting customers move from one point per dollar spent to 1.5 points at the next tier, then two points per dollar, etc. Of course it goes without saying that members should be able to redeem points for something they actually value.

Charge for VIP membership. If you think that sounds counterproductive, think about the biggest VIP club of all, Amazon Prime. Amazon charges Prime members $99 a year in exchange for free access to exclusive music and video content and free two-day shipping with no minimum purchase. How’s that working out for them? Prime members spend an average of $1,500 per year, while non-prime members spend around $600.

In addition to offering frequent customers a genuine value for their money, there’s a psychological element at play, as well: Customers who spend money to buy a VIP membership feel compelled to use their perks more often to get full value from the membership fee, which means more repeat purchases.

Ultimately, growing your CLTV involves a lot of experimentation and crunching the numbers to see what tactics are delivering results. For some businesses, upselling is the most effective way to increase lifetime value, and for others, a well-structured loyalty reward program does the trick. Just be sure to measure everything so you aren’t operating on wishful thinking instead of proven ROI.

Do you have any tips or tactics that work in your business for building CLTV? Share them in the comments and let’s start a conversation.