Outline
- Introduction
- What is customer lifetime value – and why is it important?
- How to measure LTV
- 7 strategies for improving your LTV
- Final word
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It costs to acquire new customers, so if the investment to acquire a new customer is higher than the lifetime value of that customer, your business isn’t as profitable as it could be.
If you’re experience a downturn or a slow funnel, you’ll need to take steps to actively boost your LTV. In this blog are seven strategies to try today.
What is customer lifetime value – and why is it important?
Customer lifetime value (aka LTV, CLV, CLTV) is the average total revenue generated per person over their lifecycle as a customer. Put simply, it indicates their value as a customer.
LTV is one of the most important metrics a business can track, and understanding it is essential to growing and scaling any B2B/SaaS business. It costs five times more to acquire new customers than it does to retain existing ones, so businesses simply cannot afford to overlook strategies for customer retention.
Below are some benefits of focusing on boosting LTV:
Identifying how much revenue you can expect to earn from customers will prove the viability and sustainability of your business
You will gain insights on which marketing channels, campaigns, and messages are most effective and drive the most revenue
You will gain an accurate understanding on ROAS on acquisition campaigns
You will optimize your business towards steady, long-term growth
How to measure LTV
Measuring your CLV relative to the cost of customer acquisition (CAC) allows you to calculate how long it takes to recoup the investment required to earn a new customer, for example, cost of sales and marketing. To calculate LTV, check out our blog that covers all the formulas you need to know, such as average purchase value, average purchase frequency, and average customer lifespan.
You can also use scoring models to determine how valuable your customers find your product. Ortto’s Scores feature allows you to set up scores using a set of activities and filters from your CDP, which different teams across the business can use to quickly identify how engaged users are.
Two scores you could set up to measure against LTV are a product engagement score and a customer health score.
A product engagement score is a way to assess how engaged users are in your product and how they’re using it at a particular time. Find out more about product engagement scores and how to set them up in our blog.
A customer health score enables you to measure whether a customer is showing signs of loyalty or churn. It is a method of calculation that gives an accurate and timely snapshot of the overall customer experience. Learn more about customer health scoring here.
7 strategies for improving your LTV
Boosting your LTV is all about focusing on retention, delivering more value, improving product/feature offerings and functionality, and acting on feedback. Below are seven strategies you can use to improve LTV today.
1. Re-consider your pricing structure
For most B2B/SaaS businesses, determining a pricing/packaging model is a hard task, as tweaking dollars and cents doesn’t automatically equal more revenue.
What is worth your time, though, is considering your features on offer and whether some of the free offerings should be paid. Or, whether you are releasing a new feature that should be a standalone product instead of an add-on incorporated into your existing plan structure.
For example, a SaaS company may have offered a lot of its features for free for years to build a community of loyal users who love the product, but they may decide to build a paid structure for some of their biggest features so that they can continue to drive revenue and improve their product. While some customers will be disappointed, the long-time loyal users may be happy to pay for their favorite product.
2. Create secondary onboarding campaigns
Onboarding doesn’t have to be a one-and-done thing. Go beyond onboarding by creating secondary onboarding campaigns to help increase product usage to drive loyalty and expansion.
For example, perhaps you have an onboarding campaign that provides new customers with a product walk-through and offers how-to information to get them setup. But the learning shouldn’t stop there.
There is always more to know about your product – more features to explore, more tricks and hacks, more use cases – so be sure to keep your customers educated. You may create a secondary onboarding campaign for each new feature you release to make sure your customers are not missing the chance to make the most of it. Or maybe you create an onboarding campaign for when a customer upgrades their plan, so that they are confident and satisfied with what they’re paying the extra for.
Constantly educating your customers will increase value realization moments which will reduce churn risk.
3. Build an always-on upgrade campaign
By building always-on campaigns you can rest assured that your customers are continually being nurtured towards upgrade opportunities.
For example, a SaaS company might build a campaign where customers are reminded of additional paid features such as in-depth analytics and reporting insights on offer on a higher tier. Or, if they are nearing the end of their usage limit on a current plan, they are pre-warned via email that they’re close to hitting their limit, and if they want to continue using the product without disruption, they can upgrade their plan.
It’s easy to build an always-on journey and playbook campaigns in Ortto. Simply build an audience segment of customers or use filters and activities from your CDP to set your entry criteria, build out your email/SMS messages, and let the upgrades roll in.
4. Consider the role of new product features, integrations or upgrades in expansion
To expand your business, you need to increase LTV, and to increase LTV, you should be thinking about what more you can offer your customers to justify them, 1) staying with your business; and 2) wanting to upgrade.
Consider the new feature releases on your product roadmap: which features should be add-ons to existing plans, which should be reserved only for a higher-tier plan, and which should be bundled together as an upgrade package?
As well as new feature releases, you can also look at integrations. Are you building an integration that you know is highly sought-after in your industry, that your competitors don’t offer? Is that something that you will offer to all users, or for an additional cost? There’s no right answer – it depends on your business model, the feature/integration you’re planning to release, and the research you have conducted on your customers and the market.
5. Make better use of your resource section
If you have a resource section on your website – whether they are blogs about company news and feature releases, or whether you offer thought leadership content such as eBooks, webinars, how-to guides, and so on – be sure to make it evident to your customers.
You can embed popups into pages of your website or your app to suggest related content to users. For example, a new feature announcement blog could direct users to watch a webinar that walks through the new feature in action.
You could also set up customer journeys triggered by specific activities and behaviors to inform customers about your valuable content, which is great for upgrade/upsell opportunities. For example, if a customer downloads an eBook, that could trigger their entry into a journey where they are emailed about content that is relevant to that email, such as deep dives, information about related features, and more. Positioning your business as knowledgeable will build trust and respect with customers, and keep them coming back again and again.
You can also embed upgrade reminders into pages on your site or in your app. Check out the template below.
6. Create a feedback loop
A customer feedback loop is the process of requesting feedback from customers and responding to that feedback, whether that feedback is positive, negative, or neutral.
Customer feedback – good and bad – can tell you a lot about the quality of your product or service, your business operations, and customer support. It can highlight the strengths and weaknesses of your onboarding program, your sales and marketing efforts and more. With this insight, you can identify areas of your business that need fine-tuning or reassessing, and you can also understand more about your customers, namely whether they’re showing signs of churn or advocacy (or somewhere in the middle).
Generating feedback is easy in Ortto, as you can embed feedback popup widgets into your website. You can use different popups for different occasions, e.g. content rating, NPS, and CSAT.
Once you’ve generated feedback, you can use that feedback as entry criteria for journeys and playbooks. For example, a SaaS business may use a NPS survey popup throughout their site, and then tag users based on their score. Then, depending on that score, the user can be sent on a relevant customer journey that engages them and addresses any concerns they may have. The result is more satisfied customers with higher LTV.
You can read more about how to make the most of feedback generated in our blog.
7. Acknowledge your advocates
According to the Pareto Principle, 80% of profits come from 20% of customers. That means your best customers are contributing the most revenue to your business, and therefore have a high LTV.
It pays to acknowledge your top customers for their loyalty to ensure they continue to advocate for your business – losing them could be a major hit. Reward them in a way that aligns with your business – free gifts (e.g. merch, discounts to retailers/cafés, etc.), discounts on your product on anniversaries and milestone dates, a shout-out on social media, or even a simple thank-you email at the end of the year.
You could also highlight the value they have received from your product over the last year to remind them they couldn’t do what they do without you.
Final word
When it comes to increasing LTV, you shouldn’t rest on your laurels and expect it will grow organically and steadily over time. Instead, be constantly looking for opportunities to provide more value to your customers, compel them to boost their spend with you, and convince them that there’s no point looking elsewhere: your product offers everything they need.
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