Taking a Step Forward: Re-framing Customer Lifetime Value

In CLV 101, we discussed the main features and advantages of the CLV metric. In this following piece, we propose to re-frame the issue with a more holistic approach.

Kardelen ÇelikContent Editor

November 10, 2022
9min read

Taking a Step Forward — Re-framing CLV

Generating better ROI, increasing customer loyalty, and evaluating customer engagement through segmentation are well known benefits of CLV among marketing and sales professionals. While these statements are correct, we propose a more holistic approach to maximize the utility of CLV.

Customer journey is a concept no stranger to business professionals nowadays. Thinking about experience in terms of journey provides a framework that encourages viewing different components that make up the experience as connected and the processes as dynamic.

The same is true for CLV: your company’s entire interaction with your customers is a journey. It has different stages, roughly separated by proximity, that includes pre-engagement, engagement, and post-engagement stages. The pre-engagement stage is where your company focuses its efforts on growth and customer acquisition. From the customers’ viewpoint, this is the stage before they meet your company or before a transaction happens, in the case of returning customers. This is where you welcome them to your turf. The engagement stage is where the customers interact with your company through many touchpoints and conduct business with you. This is the stage that includes the processes that traditionally come to mind when thinking about business. The post-engagement stage starts immediately after the completion of a transaction. Your customers needed a service or product, and you fulfilled the need. This is the stage where you wrap up the process for that particular interaction, say your goodbyes, and hopefully receive the word for another adventure together in the near future.

The wording used here is intentional: Just as a journey is the totality of individual steps over a certain period, your company’s journey is made up of singular interactions that you have with each one of your customers. Just as you naturally move along a trail by taking one step after another, the frequency and consistency of your interactions with your customers provide the movement for your business.

Of course, trekking through a forest is different than hiking in a canyon. Even climbing up the same mountain can result in completely different experiences due to topography, altitude, weather, and depending on the target destination. Similarly, the journeys that businesses have with their customers would vary in different industries, sectors, and regions.

Your company does not operate in isolation: it exists and evolves in an ecosystem where there are many competitors, solution partners, and stakeholders. They all affect your costs, your prices, margins, as well as the time that your customers spend doing business with you. A parallel variety exists within an enterprise, as well: it is not solely the marketing and sales activities that shape a company’s relationship with its customers. Internal operations and processes affect the quality of the products and services. Coherence and alignment between different units translate into rapid reception of customer input, along with quick responses and solutions. While all are integral for business continuity, no unit or part of your business is independent from the rest. The overall success depends on the performance of all combined, and you are as strong and agile as your weakest link.

Taking a Step Back to See the Bigger Picture – How to Improve CLV

Focusing on your own area of impact, and ensuring that the pre-engagement, engagement, and post-engagement processes follow each other seamlessly for each customer in each iteration would provide movement. This would also mark the difference between standing still and running towards a point of customer orientation and boosting your CLV.

During the pre-engagement stage:

  • Determine the customer segments along with the associated preferences, expectations, and purchasing behaviors. This will allow you to see which type of your customers are more loyal and are likely to come back for future purchases.
  • Create and launch new campaigns targeting the preferences of your customers in different segments. This will not only send your customers the message that you know them well but also help increase the frequency and volume of their purchases.
  • Offer a variety of payment and delivery options. This will increase convenience, provide a smooth first-time interaction with new customers, and encourage continuity in the repeated customers’ engagement.
  • Provide special deals and discounts to your most valuable repeating customers. This will serve as a reward for their loyalty and strengthening ties.
  • Inform prospective customers on your value offer. Provide tutorials, how-to guides, frequently asked questions along with their answers to explain your service or product.
  • Offer onboarding support. This conveys your availability and the importance that you give to your customers.

During the engagement stage:

  • Make sure to provide ongoing customer support. Your customers might have questions or concerns about your product or service. Ongoing customer support helps demonstrate that your care and attention for your customers extend beyond finalization of the purchase, and that you are there to provide the best experience they can receive.
  • Roll out updates or product improvements and share them with your existing / most valuable customers free of charge or with a discount. This will not only make sure a widespread use of the most current version of your product, which will help bringing your customers on the same page in the future improvements, but also make your customers feel valued.
  • Pursue and create opportunities for upselling and cross-selling. Not just think about how your products and services work together and complement each other, but also think about how your customers can benefit from them. Bundling your products and services with differentiated features, adding sticky features to your products so that your customers keep coming back, offering benefits for annual subscription or long-term commitment would increase your CLV encouraging your customers to buy more or stay with you longer.
  • Determine all the touchpoints that you engage with your customers. This will help to breakdown the processes and determine the pain points that impede customer engagement and shorten lifetime.
  • Communicate. Create various online and in person opportunities to meet with your customers. Know where your customers spend time and meet them there. Social media, online forums, online/offline events or conventions are great ways to promote your products and services, demonstrate your value offer, be informed about the latest trends and developments in your industry, as well as to receive feedback from your customers in an organic way.
  • Create loyalty and referral programs. Such benefits may include free shipping, store points to be used in future purchases, priority access for some products or services, free or discounted technical/product support. These help to keep your existing customers and grow your customer base due to increased customer satisfaction and willingness to advocate for you in their circles of influence.

During the post-engagement stage:

  • Endeavor to treat each engagement as unique and make sure to fully close the loop when an engagement or purchase is competed. This might mean sending out customer satisfaction surveys, reaching out to your customers for a closing meeting to collect their feedback, or internally analyze the data associated with that particular engagement to evaluate the process.
  • Follow up, then follow through. What is more important than receiving feedback is to take it to heart and apply it where appropriate. Make sure you have a system in place to create value from the feedback you receive. For each feedback, understand why you received it, whether it correctly highlighted a pain point, if there are areas of improvement and if they are feasible. Even if you decide that the feedback is not feasible or cannot be prioritized at the moment, it is important to systematically collect and process customer input for constant improvement.
  • Keep in touch with your customers. Follow up on the feedback you received from them and let them know about your progress. The perception of transparency and receptiveness go a long way. Also keep in touch with your past customers with offers on products or services based on their preferences and past purchases. Communication with a personal touch keeps you in your customers’ radar and contributes to their feeling of loyalty.

Admittedly, this list can be expanded both in quantity and in coverage. However, there are some overarching enabling factors that determine their success: data and seamless integration of internal systems. First, it is imperative to have data on your sales, customers, and operations. What gets measured gets improved. Having a good understanding of the volume and frequency of your sales, the types of products and services that are on high demand, the features of customer groups, and the bottlenecks that affect the quality and duration of your delivery is the first step to understanding your strengths and areas of improvement. Further, the quality and recency of your data determines the benefit that you can receive from your analyses. Second, even if you have clean real-time data, the business units need to be able to work with that data and work together. Here, integration of internal systems and processes is crucial. Seamless integration assists information flow between different units, help their decision-making and operations, and shorten the time spent between different steps and phases. The smoother your internal processes, the smoother your operations and your interactions with your customers. The better the experience that your customers have, the higher is their loyalty and lifetime.

Enterprises that score highest on the Customer Dimension of our Digital Maturity Index (DMI) excel not only in the above outlined steps but also in running with a holistic approach. At Digitopia, we are fascinated with the complexity that businesses face, and we love tackling tough problems. We are well versed in different dimensions that ensure the vitality of enterprises. We recognize that digital is the future, no matter the sector or industry, and we guide our customers in their digitalization journeys.

Where are you in your journey with your customers? Interested in finding out more? Let’s chat!