Understanding the value your customers bring and how you can maximize it is crucial, especially when there’s an impending recession. When the economy suffers, customer lifetime value (CLV), or the long-term revenue that customers create, can take a huge hit. Consumers are more cautious and they’re likely to shop around in search of alternative or more affordable products. By focusing on customer retention, satisfaction and loyalty, shoppers stay with you longer and generate more profit.
Research done by Bain & Company shows that increasing retention rates by 5 percent increases profits by 25 percent to 95 percent. On the other hand, acquiring a new customer is five to 25 times more expensive than retaining an existing one.
Increasing your CLV ensures you’re better equipped to not only survive but also thrive during an economic downturn. Here are four strategic ways to boost your CLV:
1. Develop a customer-centric approach.
A potential recession brings uncertainty, so it’s important to keep up with changing shopping habits and market trends. How have your customers’ preferences changed? How do you address their new needs? What are your competitors doing and how can you do it better?
By putting customers first, you’re ensuring that your brand can keep up with shifting buyer behaviors. This enables you to create relevant customer experiences that drive loyalty and revenue — a more sustainable approach in times of economic difficulties. Forrester found that improving CX by one point can lead to more than $1 billion in additional revenue.
How do you set your brand up for success? There must be a strong customer-centric foundation within your organization. From customer support to product development, each department generates data that when combined allows you to derive meaningful insights into the end-to-end customer journey. These should be the core of cooperation efforts across teams and your overall CX strategy.
2. Highlight value to improve AOV and repeat purchases.
Repeat customers are a huge source of long-term value, generating 300 percent more revenue than first-time customers. What can you do for them in the context of a likely recession?
It’s natural to want to implement various tactics that increase shoppers’ basket sizes. For example, to upsell and cross-sell, you can use a pop-up sidebar widget that features popular products. Highly relevant complementary items in the shopping cart or on the checkout page can also be effective in encouraging impulse purchases.
What would stand out for your most profitable customers is the added value they get from the buying experience. With money tight, it’s important to be straightforward about ways for shoppers to get more. Product bundles and surprise gifts can encourage shoppers to buy more. Customer referrals with promo codes at checkout not only delight return customers but also boost word-of-mouth and bring in new customers.
3. Practice context-based personalization.
Not all customers are worth the same in the long term. To optimize your CLV strategy, you must be aware of the value that each customer brings and how you can sustain and maximize it.
Understanding the unique needs that different valuable customers have allows you to streamline your campaigns and segment customers based on context. You can take this a step further by taking advantage of tools that can map the customer journey from start to finish, enabling you to deliver precise experiences that drive revenue specific to each customer.
With 71 percent of B2C leaders saying meaningful personalization has a significant impact on their brands’ customer strategies, according to Deloitte, leveraging real-time customer intent and context is a necessity now more than ever.
4. Build trust and nurture loyalty.
Building relationships with customers and retaining engagement can turn one-time shoppers into loyal lifetime customers. One of the ways to achieve that is through loyalty programs.
Consumers belong to an average of 14 loyalty programs but actively use only half of those. Therefore, there’s an opportunity to create a loyalty program that’s more engaging and valuable to members. What do loyal customers want in the first place? Free shipping and instant discounts. To make it more attractive, you can incorporate gamification; experiences in addition to physical rewards; and exclusive access to content, events and more.
You also shouldn’t forget about strengthening the overall shopping experience that you deliver. This includes setting up better listening tools, amplifying customer interactions across different touchpoints, and creating priority channels so your best customers can reach you at any time.
During a recession, it’s not uncommon for retailers to become uncertain about where to spend money and make investments as shoppers set stricter priorities and reduce spending. Focusing on increasing CLV, however, is one of the best strategies to manage the initial blow and possible long-term shift in consumers’ values and attitudes. By ensuring that your most profitable customers are happy and satisfied, the continuing value that they bring can put you on a path of steady and predictable growth even during difficult times.
Rotem Yohanan is the customer success team lead at Namogoo, a digital journey continuity platform.
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