Customer lifetime value and customer engagement are linked fundamentally. Understanding these connections will help you grow your business.
A solid customer engagement strategy is a powerful way to protect and grow your company’s revenues. When you link the value of a customer to your investment in engaging with them, your returns on investment improve. In other words, when you understand the value of each of your customers, you put yourself in a great position to grow your business. That’s why knowing the value of customers helps to build your base, increase sales, allocate resources strategically and work more efficiently.
This article looks at the main information you need to understand the value of your customers.
Customer lifetime value
Customer lifetime value is an estimate of the net profit from a future relationship with a customer. As a first step, understanding the lifetime value of your customers helps you to prioritise your company’s investments in customer engagement. It also provides a road map for each account, showing where further growth can be achieved.
Sadly, all of our customers are susceptible to churn. This is particularly true when a new technology enters the market. That’s why it’s important to keep track of which clients are at risk and understand how you can protect your relationship with them. Be proactive. It’s a good idea to carry out yearly customer listening activities to spot problems and opportunities early.
Invest in your high value customers. It makes sense strategically. You will find that many of these customers are willing to try new products and services. They are often happy to refer their network to you or provide testimonials to help you to build your online content and attract new customers.
What do your customers cost?
There is an old marketing mantra that states “it costs a lot less to acquire new customers than it does to retain current ones”. But in the world of online marketing it isn’t always the case. If some customers are a drain on your resources, they might be in the 80 percent of customers that provide the bottom 20 percent of your revenue. This is where the other classic mantra comes into play; “some business can be bad business”. Find out which customers your business can’t afford to keep and take action. Your customer engagement strategy should decrease focus on these clients.
Cost of new customers
Acquiring new customers takes varying amounts of time and money. To make sure you are striking the right balance between nurturing existing clients and winning new ones, look at the financials. Analyse your return on sales and marketing investment. As you review your marketing results, remember that social reach and engagement are only adequate measures if they’re related to click-through’s and clear customer conversion. One of the problems of having lots of data at your fingertips is that it’s easy to be overly positive. A thousand per cent increase in web traffic means very little if it doesn’t convert to cash.
Understand your returns
By working to understand your marketing ROI, you can be confident that you’re balancing your marketing budget between new customer acquisition, increasing sales volume and winning repeat business.
Build your customer engagement strategy
The essence of your customer engagement strategy should be to:
- Invest in high lifetime value customers
- Decrease focus on customers that consume too much resource
- Strike a balance between nurturing existing clients and acquiring new ones.
In summary, understanding the value of your customers will help you to adapt your sales, marketing and customer service efforts. This is the way to maximise your return on investment and improve customer engagement. Find out how Larato can help you.
Here’s what one of our recent customers said about us:
“Larato has deep insight in the technology markets and sales strategy development. The Larato team creates provocative and fascinating insights on market dynamics.”Sales Director, Network Division, Zayo