How to Unlock Customer Lifetime Value to Drive Loyalty

Repeat customers can be a boon for your business. But do you know how much revenue your favorite patrons generate for your business? If you haven’t, it’s time to figure out your customer lifetime value (CLV). 

CLV is essential for understanding how to scale your business and can help you find ways to deepen customer loyalty. 

In this article, we will help you understand this metric and give you a few strategies to make your customers feel valued.

What is CLV?

CLV is a critical metric for small businesses. It measures the total revenue a business can forecast from a customer over their lifetime. 

Before calculating CLV, you need to establish the average revenue per customer and customer lifespan.

Your average revenue per customer is calculated by dividing your business’s total revenue by the number of customers. The average customer lifespan is estimated by tracking customer purchase history and analyzing customer retention rates. 

Customer lifetime value = Average revenue per customer x Average customer lifespan

When these metrics are defined, you can calculate CLV by multiplying the average revenue per customer by the average customer lifespan. 

Tactics to Increase CLV

After you have determined your CLV, you can build programs and campaigns to drive more loyalty. Here are a few ideas to get you started.

Loyalty Programs

Loyalty programs are a great way to incentivize customers to make repeat purchases and refer their friends and family to your business. 

In fact, 50% of consumers are more likely to engage in a loyalty program in 2024, according to a Marigold US Consumer Trends Report. And 73% of consumers said a loyalty program is critical if a business wants to keep them as customers. 

According to Marigold, one of the most popular loyalty programs is a points/rewards system — nearly 50% of consumers surveyed said it’s their loyalty program of choice. Also, 47% of consumers want exclusive product or service discounts, while 34% like exclusive access to products or events. 

Personalize the Customer Experience

Personalization is a great way to improve CLV. For example, a personalized email or remembering customer preferences can make customers feel valued by your business.

A Shep Hyken 2024 Customer Service Study reports that 81% of customers prefer companies that offer personalized experiences. And 70% said it’s important when a business remembers who they are and their purchase history. They also want the experience to include the digital platforms where they prefer to do business. 

Building personalization into your business doesn’t have to be a big lift. You can use customer names in communications, make product recommendations based on past purchases, or send personalized birthday or anniversary messages.

Provide Excellent, Consistent Customer Service

Nothing will ruin your business faster than bad customer service. Word of mouth can work for you or against you. Customers will spread the word when they have a positive experience with your company, but the same can be said if it’s terrible. 

Consider this: 50% of consumers will share a bad customer experience with friends and family, compared to 45% of consumers who have a good experience, according to a Qualtrics XM Institute study. Search Engine Journal reports that 99% of consumers who had a bad experience will leave negative comments on review sites, which will negatively impact your company’s online brand.

If you’ve had service issues, prioritize responding to customer inquiries quickly and efficiently. You should also resolve any outstanding customer issues promptly. 

Measure and Track your CLV

Once you’ve identified your CLV and implemented strategies to maintain or improve it, you should consistently track this metric to measure the effectiveness of your customer retention efforts.

Also, engage your customers. Get feedback about your customer service and ask which loyalty programs they prefer. 

If you need help launching a loyalty program, contact Origin Story. We can help build integrated marketing campaigns to surprise and delight your customers and deepen their loyalty.