Customer acquisition costs are rising, and that could spell disaster for your company‘s bottom line. Luckily, big data could have a solution. By increasing the lifetime value of each customer, it’s possible to make up those added acquisition costs, even if you can’t bring in as many new buyers.
Assessing The Problem
Because customers spend the majority of their budgets on customer acquisition, it can be difficult to spot the problem in the first place at least if you’re not watching the data. But if you take a step back from the daily marketing push, the issue comes into focus.
For example, the innovative meal service Blue Apron saw acquisition costs climb in 2017 and concluded their marketing expenses were out of control and that they should focus on retention instead.
Blue Apron isn’t alone; they’re one of just many companies struggling to balance acquisition costs with sales. What these companies have discovered along the way, though, is that all the answers are in customer data who bought what when and why.
Focus on Retention Metrics
The first step to increasing your average customer’s lifetime value is figuring out what their current value is and you might be surprised how difficult this is to do. At present, fewer than half of all companies have an accurate measure of lifetime customer value, meaning they’re not paying enough attention to retention and not driving repeat sales whenever possible. As acquisition gets more difficult, it’s easy to get distracted.
A full 80% of companies use email marketing to meet their retention goals, even though only 56% of marketing professionals believe it to be the most effective strategy. But what do the rest think? Though there’s not a strong consensus regarding the ideal strategy, research suggests that the key is connection. And email doesn’t offer enough of a relationship to keep customers coming back.
Identify the Most Valuable Customers
Ensuring customers come back is important to increase lifetime value across the board, but it’s especially important when it comes to your most valuable customers. Luckily, increased data collection makes it easier for your company to identify repeat buyers and top spenders. And once you know which customers are especially loyal, you can use historic data to identify customers with the potential to grow in similar ways. While sales patterns are subject to change, if you can identify the same activity patterns over and over again, there’s a strong likelihood you’ll see them in future customers as well.
Watch Execution Costs
Just like customer acquisition costs money, so does executing a retention campaign so don’t overlook those numbers when calculating for lifetime growth value. Yes, it’s generally cheaper to keep current customers active and engaged in repeat sales, but there are still expenses. You’ll need to develop strategies for fostering repeat sales, to reallocate resources for greater individual engagement, and more. There is no one and done solution when it comes to retention.
Customers want to work with a business they can trust and who shares their values; when they find a company they match with, they’re prone to stay put. Still, you need to build up your appeals to keep them coming back. When you stop paying attention, you leave your customers open to overtures from other businesses. Keep your focus, and you’ll keep your customers.