Eight powerful ways to increase your customer lifetime value
Customer lifetime value is a testament to the success of your SaaS business. The higher your customer lifetime value is, the longer you can turn profits and grow. Remember that LTV is a balancing act that goes hand in hand with your CAC. A viable business model will always yield a higher customer lifetime value.
Here are some actionable ways to extend the life of your customer and get CLV higher.
1. Make onboarding seamless
Your onboarding process is a very sensitive moment. It’s critical to get right, because it's the first time a new customer really encounters your brand. A great experience can win you a loyal customer (and boost your CLV), while a bad one can make them jump ship to one of your competitors. You should create an onboarding process that’s fast and straightforward, providing easy-to-follow guides and tutorials.
2. Invest in product education
Product education is a great way to retain your customers for longer, as it helps them understand the value in different aspects of your product. A great example of this is Neil Patel’s Ubersuggest, an SEO tool. Patel provides highly informative educational articles, which teach his customers how to strategically use a wide variety of the tool’s features, keeping them subscribed for longer. Ubersuggest’s comprehensive free content also helps to attract new customers.
3. Invest in driving cross-sell/upsells
As mentioned earlier, account expansion is when the customers upgrade their accounts. You can optimize this by up-selling (selling more features or product extensions to your existing customers.) Or you can cross-sell related products alongside your core offering. Both are great for boosting your CLV while keeping your customer acquisition costs down.
4. Make your product ‘sticky’
The strategy involves adding features to your product that draw the customer in and make it difficult for them to leave. For example, offering them a custom dashboard in which they can integrate their own data to help improve some aspect of their business.
This keeps them on board for longer, as it solves a pain point while also driving their business growth. The result? Enhanced CLV for your company.
One example of a SaaS company making great use of ‘sticky’ features is cloud-based storage solution Dropbox. The automatic sync feature seamlessly backs up your files into the cloud, without you even having to think about it. As a result, you end up staying with the service for longer.
5. Nurture customer relationships
Happy customers stay loyal customers for longer, it's a no-brainer. That's why improving your CLV involves nurturing customer relationships. One way to do this is by investing in excellent customer support. You should have an efficient, responsive team in place and offer support across multiple channels.
Another way to nurture your customers is by responding to their feedback and acting on it. Doing this regularly helps you identify when something is going wrong so you can fix it before it leads to churn. What's more, customers love it when they feel understood, so make it your mission to do so.
6. Encourage loyalty
One way to cultivate loyal customers is by rewarding them for staying with your business over time, for example by offering extra features, a month free of charge, a renewal discount or similar. By making the reward something already closely related to your product, you can be sure that they’ll find it useful.
Another way to encourage loyalty is by creating referral programs where your customers can earn rewards from referring your product to their networks. Web hosting company Bluehost is a good example of a popular referral program that offers tiered commission to its successful affiliates.
7. Target the right customers
You can't win every customer, and, as any marketing textbook will tell you, getting your target audience right is part of the battle. Try to really understand who will gain the most value from your product and plan your strategy around winning these valuable customers. They’re the ones most likely to stick around in the long run, bringing you better CLV!
8. Scalable pricing
Scalable pricing is vital to success in any SaaS business. The pricing structure should be created to scale either up or down capturing the smallest/cheapest customers, up to the largest, most valuable customers willing to pay more. The best way to do this is through what's known as a value metric (number of users, number of visits, depth of usage, etc.). Read more about value metrics and choosing the right one here.