Develop a comprehensive customer value optimization program.
First, define the impact of customer retention to understand customer value. Then stress the importance of customer value to your company’s employees. For example, plan an employee workshop on the importance of customer retention. Assess your qualitative data, in the form of customer feedback, and your quantitative data, in the form of customer retention key performance indicators (KPI) to focus on long-term growth. Customer value is a company-wide measure of success, not a marketing KPI.
Customer lifetime value can be influenced by:
- Recency, frequency, monetary distribution (RFM). Segment your customers to find out who your most valuable customers are and how their needs change over time. Then target specific customer clusters based on behavior, generating higher rates of response, increased loyalty, and better customer lifetime value.
- Margin. RFM analysis reveals customer anomalies that highlight the most important customer groups after taking customer acquisition cost and margin into account. For example, the Pareto Principle, applied to profitability, suggests that, on average, 20% of repeat customers bring in 80% of the margin.
- Customer experience. Measure customer experience by assessing the following KPIs; product reviews, net promoter score, customer effort score, resolution rate, and product return.
- Customer retention rate. Calculate your customer retention rate periodically, so you can understand whether you are nurturing your customers effectively or targeting the right people in your campaigns.
- New customer stickiness. Investigate your email marketing campaigns to determine which campaigns brought you repeat customers versus one-time purchases.
Ask each RFM group a set of questions, including demographics, reasons to buy, net promoter score, barriers, reasons for not returning, and other custom questions based on the business case and goals. Send the surveys via email, or for smaller RFM groups, consider live interviews in person or over the phone or Zoom. Separate net promoter score ratings from all other questions.
Anomalies in your quantitative data give you hints about what differentiates a certain group from others and allows you to discover toxic brands or categories, and cities with loyal customers. Assess anomalies by asking questions like:
- Are your best customers located in a certain geographic area?
- Are they primarily in an industry you have neglected to market to?
Define your Ideal Customer Profile using recency, frequency, monetary, segmentation and data analysis.
Define your Ideal Customer Profile (ICP) by mixing the quantitative and qualitative data you have gathered, alongside buying patterns from the RFM analysis. Craft your ICP by taking the following into consideration:
- Who they are: location, gender, and age.
- When they buy: buying habits.
- What they buy: product assortment anomalies.
- What keeps them coming back: reasons and barriers.
- What they need going forward.
Defining your ICP provides the opportunity to optimize for:
- Better ad targeting and lower customer acquisition cost, by focusing on specific product and brand recommendations or in specific regions for a certain RFM customer.
- Better assortment and merchandising based on what RFM groups are buying and optimized inventory. For example, you can reduce stock on less-popular products.
- Better customer service by providing priority support, better response rates, or tailor-made return programs to customers who matter most.
Review your holistic business and marketing goals by analyzing the all the contact points of your customer journey. Determine what works and what needs improvement.
Apply the ideal customer findings across the entire journey to create an infinite loop that drives conversions and supports repeat orders. You can do so by:
- Providing better customer service for the best customers.
- Acquiring more customers like the ICP. For example, custom and lookalike audiences.
- Creating a better product assortment.
- Building better nurturing campaigns such as email, ads, SMS, and website personalization.
Pair specific improvements with phases in the customer lifecycle. Optimize:
- Need phase: Your general marketing efforts. You can generate need by focusing on lead gen campaigns on Google Ads, social media, and your website copy. Ask: Is it clear to potential customers why your products or services meet their needs?
- Research phase: This phase is about narrowing your focus and includes specific campaigns designed to help with positioning and rearrangement. Ask: How can you help those with a need discover the right solution from your products and services?
- Select Product phase: Create campaigns to move a potential customer toward completing a purchase. You can use back-in-stock campaigns, browse recovery, and promotions to encourage a sale.
- Purchase phase: This phase covers the order status, thank you page, NPS insights, and plays a role in future cart abandonment campaigns. Align your marketing, fulfillment, and customer service departments so that purchases happen without friction.
- Receive phase: Focus on customer satisfaction by considering how your email, SMS, and phone channels can improve customer service. Ask: Are there clear next steps via email after a purchase? Do you have an automated email sequence creating further excitement around what they just purchased?
- Use Product phase: Focus on upsell campaigns by reviewing your current educational materials and considering how you use email, SMS, phone, and your ads.
- Maintenance phase: Focus on customer retention, and your goal is to keep current customers happy and engaged. You can use well-timed reengagement campaigns, for example, birthday or anniversary style campaigns, or loyal customer discounts.
- Referral phase: Use referral campaigns to evaluate the interest of your customers and their willingness to spread the word about your products and brand. Make it easy for happy customers to share with their friends and family to both increase current customer loyalty and drive new business.
Optimize your customer journey further by providing tailored offerings that transition your campaigns from segmented to personalized.
Consider steps to promote long-term growth:
- Continuous cohort A/B testing.
- Loyalty programs.
- Referral programs.
- Customer acquisition.
- Email orchestration.
- Website experimentation.
Ongoing personalization keeps the customer engaged on the website and in other mediums, like social media, email, and SMS. Increase personalization for your most valuable customers. Offer your most valuable customers, or Soulmates:
- Access to a new range of products earlier than the rest.
- Limited-edition products catered to their taste.
- Invitations to special events.
Profile of a Soulmate customer with goals and next steps.
Personalization shows your most valuable customers why you deserve their business.