Let’s talk about one of the best ways to increase the bottom line. For businesses looking to profitably scale, customer lifetime value is an effective and often overlooked source of revenue expansion.
Your existing customer base is a wealth of untapped opportunities that can generate growth for less cost and effort than acquiring new customers.
An article published by Harvard Business Review found that acquiring a new customer can cost anywhere between five and 25 times more than retaining an existing one. Additionally, a study conducted by Bain & Company found that a 5% increase in retention rate can increase profit between 25% to 95%.
In other words, you can get a higher rate of return on your acquisitions by investing in and marketing to existing customers.
Growth potential exists within the customers you already possess, and your marketing teams can help you capture it.
How To Increase Customer Lifetime Value Through Retention and Advocacy
Before we can convince customers to spend more money with our company, we need to ensure two things.
First, customers need to see and demonstrate value in the relationship.
To turn customers into advocates, you need to be able to ensure that customers:
- Are achieving their intended value
- Understand the total value of your relationship and can demonstrate it
- Interactions are consistent, tailored, and EASY
- Have ready access to support and help
Second, your organization must be able to identify opportunities to increase customer value as they arise. This is achieved by:
- Maintaining regular touchpoints with customers
- Showcasing extended value and features
- Identifying common pitfalls and triggers that signal a customer likely needs help overcoming a challenge
These requirements may seem like common sense, and you may recognize these objectives as the primary activities that your customer service and support teams engage in. However, many organizations struggle to nurture advocates and identify opportunities in the existing customer base.
Why Organizations Struggle to Increase Customer Lifetime Value
Businesses often struggle to intentionally expand customer spending because they focus their marketing and sales efforts solely on the top of the funnel.
The funnel concept (depicted below) emphasizes creating leads from prospects and ultimately converting them to customers. In this way, customers move through a funnel in a one-directional manner. Once a customer “converts,” there is often little marketing attention placed on delighting the customer and maintaining an ongoing relationship.
This singular obsession with new customer acquisition isolates your service team, leaving them to engage and manage customers in a vacuum. It also has the unintended consequence of creating a transactional relationship with your customers and neglects the massive potential in your current customer base.
Exclusively working to acquire new customers is expensive, inefficient, and neglects the value of word-of-mouth.
This isn’t to say your marketing teams shouldn’t be attracting new customers to the organization and filling your sales funnel with opportunity. But with the high cost of customer acquisition, it’s in your organization’s best interest to also increase customer lifetime value.
The good news is that just like with new customer acquisition, marketing has the tools and expertise to help your service and sales teams cultivate and qualify leads from your existing customers.
Marketing’s Role in Bottom-Line Growth From Existing Customers
If you’re utilizing inbound marketing strategies to educate and draw in prospects, then extending these tactics to the entire customer journey is an easy transition.
Inbound marketing is an extremely effective digital marketing strategy that aligns with modern consumer and decision-maker behavior for those who may not know.
If you haven’t tapped into the value of inbound marketing, it’s time to stop focusing exclusively on the top of the funnel and to start enabling your customers throughout their entire journey.
Leveraging marketing expertise across the entire customer journey to educate customers, enable self-service, and identify opportunities has a whole host of benefits.
- Increase customer satisfaction
- Expand customer ROI and accelerate customer adoption
- Lower cost-of-service
- Improve word-of-mouth
- Identify opportunities to increase customer lifetime value
- Increase the efficiency of sales and service efforts
This process of turning creating advocates, increasing customer lifetime value, and expanding word-of-mouth is called a virtuous sales cycle. Sound familiar? It’s often referred to as a customer flywheel.
Expanding customer lifetime value with a virtuous sales cycle requires that organizations step outside the confines of a funnel and look at the customer journey as a whole.
Just because a customer has converted doesn’t mean their interactions with marketing and sales should end. As a matter of fact, your customers are more engaged and willing to hear from you after investing.
In other words, marketing to your existing customers has great potential to grow your bottom line.
So what are you waiting for!
Marketing Efforts That Increase Customer Lifetime Value
It’s important to mention that relentlessly selling to your customers is not a good idea. Your customers deserve need to be nurtured, demonstrate value, and understand how your solutions can be of greater benefit.
Luckily, marketing teams are experts at knowing customers, engaging them with content, distilling value, and leveraging digital tools.
By providing and engaging customers with value marketing teams and generate leads.
Common and effective means of marketing to existing customers
- Educational Content: Focus on assisting customers in solving problems. Helping customers overcome challenges makes it easy to identify opportunities to expand offerings or overcome hurdles and achieve value.
- White Papers & Case Studies: These resources demonstrate the value that your other customers have achieved and provide social and industry legitimacy. They also provide your customers with a relatable roadmap to achieving success.
- Nurture Email Campaigns: Email nurturing campaigns that provide free insights, value, and thought leadership. They also keep customers engaged with your brand and provide value for free.
- Newsletters: Occasional newsletters showcase expertise and industry trends. A newsletter can elevate your brand to thought leadership and a trusted resource when not focused on features and selling.
- Public Knowledge Base: Educate potential and current customers and help them overcome challenges. These portals become valued resources and create opportunities to drive awareness about new features and products. They also show potential customers that a wealth of knowledge and support exists to help them achieve results.
- Advocate & Communities: Advocates generate word-of-mouth marketing. By promoting peer-to-peer interactions, advocates build trust and promote value. Communities drive awareness, create social legitimacy, and help customers achieve greater value by working together.
- Cause-Marketing: Embrace a purpose and share it with your customers. People want to belong to communities that share their beliefs and do good in the world. Do you want to create brand fanatics? Become a valued part of their personal identity and strive to be more than just a business.
Your existing customer base offers significant opportunities to generate revenue by selling upgrades and accessories, expanded features and offers, renewals, multiple purchases, and new solutions.
By adopting inbound strategies and mindsets—your marketing teams can continue to engage customers and easily identify when opportunities to expand value arise.
Final Thoughts on Marketing’s Role in Generating leads from your customers
Expanding customer lifetime value and creating virtuous sales cycles take time, interaction, and practice to perfect. Working with your marketing teams to expand their efforts beyond the top of the funnel—is a natural starting point to increasing lifetime customer value.
As your communication experts, marketing teams are well-positioned to help your customer-facing teams provide value and present a polished united front.
If your marketing teams don’t have the resources to engage and support your other teams, you likely have staffed your marketing teams for exclusively engaging at the top of the funnel.
A great alternative may be to leverage an agency to help augment your marketing team’s efforts. As an added benefit, their outside perspectives and diverse industry expertise can help ease the alignment with sales and service. What’s more, these resources can be quickly scaled to fit your specific needs, thus lowering your overall costs.
If your organization is looking to create and take advantage of a virtuous sales cycle and expand customer lifetime value, look for an agency specializing in inbound marketing and a diverse skillset spanning the entire customer journey.
At SequoiaCX, we are passionate about creating effortless and competitive customer experiences. We are happy to schedule a free consultation to talk through your business and share our insights. Don’t worry. We won’t try to sell you. If we can help, great! If not, the opportunity to share and help is more than worth the conversation.