Post by ruhaimaromana22 on Nov 6, 2024 1:23:46 GMT -6
What would you like more: if the client buys once and goes to competitors or buys year after year? Do you like the second option more? Welcome to the world of customer-oriented business and long-term customer relationships.
A customer stays with a company for a long time if they like it. “Liking” is one of the most common, simple and vague categories, so you need to look at what lies behind it. A customer likes social media marketing service something because of the set of impressions that the company has provided: a good product, pleasant staff, convenient location, interesting content, regular social media updates, individual offers. And also high-quality service in all communication channels .
The listed impressions directly affect the customer experience, but long-term relationships are affected by even smaller details:
Will the composition of the product change for the worse?
Is it always pleasant to communicate with the staff?
Will the company change the location to an inconvenient one?
Will it stop publishing educational and entertaining materials?
Will the company wind up its loyalty program based on a decision by the board of directors?
The questions have one thing in common: the consistency of companies' efforts in building relationships with the client. Most often, the answers to these questions depend on business values and decisions:
Do we want to cut costs to increase short-term benefits?
Do we want to increase spending to increase long-term benefits?
[caption id="" align="alignnone" width="780"]Cut down one tree or grow a whole garden? [/caption]
A company that invests in developing relationships, customer service, and experience recoups the cost of customer acquisition in the long run. On the contrary, a company with an imbalance on the side of short-term efforts - a lot of advertising and inattention to service - in the future comes to the understanding that customer purchases do not recoup the funds invested in promotion.
Customer lifetime value (LTV, CLV)
When talking about expenses, budgets, benefits, and long-term relationships, you can’t do without customer LTV—metrics help you understand what’s going well and where tactics and strategy need to be overhauled.
Customer lifetime value ( LTV , CLV) is the net income that a customer brings in over the entire period of using the company's products.
Business valuation using the customer lifetime value indicator shifts the focus from acquiring customers who quickly leave to working with long-term relationships.
There is more than one formula for calculating LTV — various sources offer their own options. The following indicators are most often used:
average purchase value per customer;
how many times does he buy during the year;
how many years has he been buying;
customer acquisition costs;
cost of customer service;
customer churn rate.
Roughly speaking, calculating CLV comes down to calculating net revenue from one client . If one client spent 200,000 rubles over five years and never bought anything else, and the costs for him during this time amounted to 100,000 rubles, then the client's CLV will be 100,000 rubles.
Let's look at one of the formulas.
Average Purchase Amount * Number of Repeat Purchases Per Year * Average Retention Time (in Years)
Example: a customer buys books for 1,000 rubles every two months for five years. 1,000 * 6 * 5 = 30,000 rubles
customer lifetime value
The figure of 30,000 rubles shows that it is impossible to spend 40,000 rubles on one customer - the loss will exceed the income. If the company plans to spend exactly 40,000 rubles, then it will have to increase LTV - retain the customer as long as possible. At the same time, over time, the costs per customer decrease, because attracting is more expensive than maintaining customer relationships. A
useful practice in calculating CLV is segmenting customers and calculating by segments. Buyers can buy one book and leave - planning their value based on five years would be a serious mistake.
What to do to keep a client from leaving after the first purchase?
The task of reducing customer churn is directly related to LTV — the lifetime value of a lost customer is low. To prevent churn, the customer needs to enjoy interacting with the company. We talked about customer experience management — this is the key to long-term relationships. Here we will briefly describe the necessary actions.
A customer stays with a company for a long time if they like it. “Liking” is one of the most common, simple and vague categories, so you need to look at what lies behind it. A customer likes social media marketing service something because of the set of impressions that the company has provided: a good product, pleasant staff, convenient location, interesting content, regular social media updates, individual offers. And also high-quality service in all communication channels .
The listed impressions directly affect the customer experience, but long-term relationships are affected by even smaller details:
Will the composition of the product change for the worse?
Is it always pleasant to communicate with the staff?
Will the company change the location to an inconvenient one?
Will it stop publishing educational and entertaining materials?
Will the company wind up its loyalty program based on a decision by the board of directors?
The questions have one thing in common: the consistency of companies' efforts in building relationships with the client. Most often, the answers to these questions depend on business values and decisions:
Do we want to cut costs to increase short-term benefits?
Do we want to increase spending to increase long-term benefits?
[caption id="" align="alignnone" width="780"]Cut down one tree or grow a whole garden? [/caption]
A company that invests in developing relationships, customer service, and experience recoups the cost of customer acquisition in the long run. On the contrary, a company with an imbalance on the side of short-term efforts - a lot of advertising and inattention to service - in the future comes to the understanding that customer purchases do not recoup the funds invested in promotion.
Customer lifetime value (LTV, CLV)
When talking about expenses, budgets, benefits, and long-term relationships, you can’t do without customer LTV—metrics help you understand what’s going well and where tactics and strategy need to be overhauled.
Customer lifetime value ( LTV , CLV) is the net income that a customer brings in over the entire period of using the company's products.
Business valuation using the customer lifetime value indicator shifts the focus from acquiring customers who quickly leave to working with long-term relationships.
There is more than one formula for calculating LTV — various sources offer their own options. The following indicators are most often used:
average purchase value per customer;
how many times does he buy during the year;
how many years has he been buying;
customer acquisition costs;
cost of customer service;
customer churn rate.
Roughly speaking, calculating CLV comes down to calculating net revenue from one client . If one client spent 200,000 rubles over five years and never bought anything else, and the costs for him during this time amounted to 100,000 rubles, then the client's CLV will be 100,000 rubles.
Let's look at one of the formulas.
Average Purchase Amount * Number of Repeat Purchases Per Year * Average Retention Time (in Years)
Example: a customer buys books for 1,000 rubles every two months for five years. 1,000 * 6 * 5 = 30,000 rubles
customer lifetime value
The figure of 30,000 rubles shows that it is impossible to spend 40,000 rubles on one customer - the loss will exceed the income. If the company plans to spend exactly 40,000 rubles, then it will have to increase LTV - retain the customer as long as possible. At the same time, over time, the costs per customer decrease, because attracting is more expensive than maintaining customer relationships. A
useful practice in calculating CLV is segmenting customers and calculating by segments. Buyers can buy one book and leave - planning their value based on five years would be a serious mistake.
What to do to keep a client from leaving after the first purchase?
The task of reducing customer churn is directly related to LTV — the lifetime value of a lost customer is low. To prevent churn, the customer needs to enjoy interacting with the company. We talked about customer experience management — this is the key to long-term relationships. Here we will briefly describe the necessary actions.