Partners Over Partnerships: How Authentic Customer Lifetime Value Can Drive GrowthCustomers have many options to choose from, and they don't buy from you just because you want them to — your motives really attract them.
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Seamless ecommerce has become table stakes for consumers. In 2021 alone, U.S. ecommerce salesreached over $870 billion; a number economists did not forecast to occur until this year. Customers not only find brands they love online but choose to form long-term relationships throughsubscriptionsand memberships. The recurring subscription-based business model hasexperienced unprecedented growthin the last ten years. Over 85% of U.S. consumers are active subscribers as of May 2022.
These trends highlight an evolving set of consumer expectations forB2C businesses. Organizations who hope to win in the ecommerce channel and get ahead of their competitionmustreturn to a fundamental understanding of their customer. After all, consumers don't magically buy things from you because you think they should. They buy for a litany of underlying motives.
Businesses must actively pursue their customers as partners in the organization, usingCustomer Lifetime Value(CLTV) as a critical measurement of their success.
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What is Customer Lifetime Value (CLTV)?
CLTV is the amount of money, on average, a business earns from a customer over the relationship.
This metric is essential to understand and utilize for multiple reasons. It demonstrates the impact ofcustomer retention. Research byZippiashows that 65% of a company's business comes from existing customers, and more than 70% of customers will switch to a competitor after onebad experiencewith a brand.
CLTV encourages companies to view consumers as partners, impacting a brand's journey and its products. AtTruly Free, we see our customers as family. Let me say that again… we see our customers as family. These are not just words on a page, but we try hard to act them out daily and in every action.
At every step in the customer journey, we ask if we would recommend this to our families. Everything from the prices we charge to the ingredients that we put in our products has the primary consideration of our customers in mind. This deep commitment to our customers at every level of the organization directly impacts our Customer Lifetime Value.
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How to improve Customer Lifetime Value
The customer value journey begins with data. As a business, there are several opportunities to collect data to fuel your understanding of consumers and their habits. This includes demographic, transactional and buying preference data.
Data should also be gathered across all touchpoints of the customer lifecycle. We heavily emphasize measuring 30, 60, and 90-day CLTV as we've found the first90 days of a customer journeyis key to optimal customer satisfaction. This data can then be used to actively engage customers where they are in the buying process with content they care about. Again, think of the customer and their needs initially and throughout the relationship.
When it comes to recurring business model companies, accuratedata gathering and analysis, along with interpretation and action are crucial.Subscription-based business modelsare built on a cornerstone of relationships. Gaining in-depth knowledge of your consumer's buying habits and what keeps them returning is essential to driving lasting connections.
Make sure you determine your customer acquisition and retention costs. We use unit economic analysis and CLTV to help us determine where we invest our marketing dollars. Hence, CLTV is at the core of allocating themarketing budget. This commitment to retaining and increasing customer satisfaction with our brand (measured through CLTV) helps to ensure that the investments you make to acquire customers and retain them create a win for customers and a win for the business (in the form of positive ROI).
By reviewing current customer data, key experience touchpoints, and the cost ofacquisition and retention, you will begin to identify and gauge the impact of high-value customers and adjust your marketing investments accordingly.
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How to build authentic customer lifetime value
There are numerous methods for actually calculating customer lifetime value. Whatever your method, I believe the most critical piece is ensuring yourvalueis authentic. Today, many consumers are turning toward brands that prioritize social impact. Yet brands are not ready to meet that demand. Research by Deloitte found thatonly a third of companiescurrently see social impact as core to their strategy.
It's time for consumers to become partners with brands — and for brands to embrace this mindset. At Truly Free, we make sure every consumer knows the power of what they purchase. Rather than thanking our customers for buying laundry detergent, we let themknow that their purchase generated $481,000为当地社区在世界范围内,有他lped free over 230,000 homes from harmful chemicals, and helped eliminate over 6.2 million single-use plastics, so they feel part of a larger mission.
Connecting your customers to a genuine need and larger purpose helps build a connection to your brand and ultimately drives a longer-term customer with recurring revenue streams.
