In this weeks blog, I’m going to share a number of tips with you to help you increase your average customer lifespan and decrease churn.
The term we use to describe how valuable one customer is by Lifetime Value or LTV for short. It’s an extremely important metric because it guides yhat you can spend on your CTA (Cost to Acquire). Generally a higher LTV justifies a greater acquisition spend which undoubtedly gives you the edge over the competition,
You can also use LTV to analyse just how probitable your business can be and how well you’re improving customer retention.
Why should you aim to increase your average customer lifespan?
If you sign up 1000 customers that each pay $300 per year. Imagine that the average lifespan of your customers was 1 year. Assuming they all paid up front, today, you’d make $300,000 this year.
Your customer lifespan is important because If you increase your customer lifespan you increase your revenues. Imagine you got the same 1000 customers to stick around for a second year: all else being equal you’d make another $300,000 from the group during the second year as well.
When considering lifespan we also need to consider churn. In the above example we’re assuming the churn rate is 0% – i.e. all 1000 customers stay for both years. Instead, imagine if your churn rate increased to 10% and 10% of your customers left after the first year. You’d only make $570,000 over the two years. Likewise, if your churn rate was 20% you’d only make $540,000.
Although oversimplified, this example shows that keeping your churn rate as low as possible will have a dramatic impact on your revenue!
Increasing the lifespan of your customers and decreasing your churn rate
Email remarketing strategies used to increase customer lifetime can also help in decreasing your churn rate. There are two key things that you need to succeed in:
- Ensuring customers come back, and
- Keeping your customers for as long as possible.
1. You already know your customers have a demand for products and features that you offer, so make sure you reach out to them to remind them that you’re still around.
The fact that the customer has shopped or signed up with you before is a good indication that they have a need for your product. By knowing what customers want you can setup automated campaigns that target opportunities for a repeat sale and drive your average customer lifespan higher.
Some great ideas to put this into action are things like…
- Wish list sales. Get to know what the customers desires are, let them know when there’s an offer that might interest them.
- Out of stock notifications. Sometimes items are out of stock and you can’t sell then and there. Attempt to lure them back with the option of a notification to tell them an item is back in stock.
2. Remind customers why YOU are awesome
A weekly or monthly newsletter is a great way to remind customers of just how good your business is at delivering a service to them. If you can put a monetary value on what you’ve saved them over time, this is great – customers love to see savings mount up over time.
3. Anywhere you can sell a product repeatedly: encourage the customer to buy again
Why focus on the big ticket items when you can engage with customers more often with lower value, repeat purchases? Subscription e-commerce businesses have shown the potential of the repeat purchase.
As a store owner you have a lot of knowledge on what your customers are asking for, buying and when they’re doing it. This information is hugely valuable in being able to engage with your customers and encourage repeat sales.
4. Keep your customers informed and educated on the latest developments
The sharing of content is a no-brainer opportunity, a lot of companies overlook the opportunity to keep customers informed about new developments on the product that they’ve recently purchased.
Providing relevant feature updates, tips and suggestions well after a customer begins paying is a great way to stay engaged. Don’t let the customer forget about you. Drive them to use new features and become more invested in your product. Provide useful and meaningful content and you will reduce the likelihood that customers go elsewhere for their next purchase.
5. Have a longer payment period
Switching people to an annual rather than a monthly or weekly payment gives a certain amount of longevity and also gives you a cashflow boost. Software companies will often use this tactic by offering a discount on the annual sign-up or upgrade option.
6. Be smart and be aware of what your customer are searching for
One of the biggest names in the industry ‘Amazon’ has mastered the art of emailing customised content based on customer behaviour. They identify where a customers has searched for an item, the value of those items and even the brand.
7. Love your customer
There’s a significant amount of value that can be derived from just telling the customer how great they are – they’re the customers that will stick around when something goes bad and will even defend your brand if needed. ‘We just wanted to say thanks…’ goes a long way.
Another approach is to target customers to whom you can offer an unexpected discount, upgrade or tip that will deliver a tangible benefit.
Larivio specialises can help your business get on the right track for social media marketing. If you’re interested in learning more, feel free to contact us.