19 best ways to boost your customer lifetime value (LTV) — the ultimate guide
When you are startuping, you really have to be careful how much you spend and on what because you may be out of cash quite fast. A lot can be done on the cost side and improving your efficiency, yet there is much more potential in growing your customer base (preferably cheaply) and growing their contribution to your top-line. Today we gone concentrate only on one thing — growing the Life-Time-Value LTV of the customer so in other words for those customer who are already with you trying to sell more or at higher margins. Below you will find some ideas how to do it with some examples of those who applied a given technique. Enjoy going through the list :) :
1. Extend the time of usage of your products.
Some products by design are created for specific age group and once your customer passes some age threshold you lose him. You cannot also acquire new customer from other age groups because the affiliation with you targeted age group is so strong. If you are in that position, do not worry — there are plenty of success stories in that area. The most known is Kinder Bueno that even in the name specifies that it is for kids. They paid a lot of attention to communicating to the market that it is ok to eat Kinder Bueno even if you are not a kid:
Well that’s an easy one — you are selling product A to your costumers so you are looking for a product B that you can also sell to him. You do not have to even produce it — just use the trust you have built with the customers. You can find plenty of examples in retail — virtually every chain is expanding its product range using this logic (to the point where the customer feels lost at the store ;) ) . Still, you can find less intuitive examples i.e. the food corners at the gas station — one does not go hand in hand with the other but it works. Over the recent years very successful in the application of that rule was Salesforce, Google, Aple
3. Sell complementary products.
You can treat this technique as a subset of cross-selling but we prefer to keep it separate because here products have to be tightly connected: beer and chips, clothes sold in sets (that’s why you will find sets exhibit at the stores, look-books for inspiration). Our own private super hero in the application of this method is of course IKEA — they bring you basically everything you will need for your house
Up-selling is the bread and batter of SaaS companies. You have the customer that is using a lighter, cheaper version of your product and you want him to upgrade to a more expensive version. Quite often the starting point is free product. Make sure in this method that the more-expensive version actually give you higher profit (trust me not always the case). The masters of this method are Dropbox and Evernote. To be successful in this method prepare effective and cheap way to communicate with customers — you can up-sell him only through intensive explanation and stimulating him to use more and more expensive plans.
5. Switch to subscription model.
Most of the products give you huge freedom to change suppliers. You do not like the specific yoghurt well no problem in 3 seconds you can switch from brand A to brand B. That unfortunately, makes the customer acquisition and retention more expensive. On top of that if you limit the freedom to switch all of sudden customers stays with you much longer and spends more. The well knows examples are mobile operators and cable TV operators. You can still do it a trivial products like razors — have a look at the DollarShaveClub.com
Bundling is easy — you put 2 products (usually complimentary products) together and try to sell them as one — you cannot take one without taking the other one. The expert in that field are the cosmetics producers (Gillette being at the top) and fashion retailers as well as DIYs. The funny thing is that even without significant increase in revenues you can drastically increase your profitability (when the complimentary product is simple and inexpensive) — electronics retailers make much more revenue on software and gadgets than the hardware
7. Increase the usage of the product.
The best example of successful application of this method is toothpaste producers — in every ad they show you that you have to put tons of toothpaste so that your teeth are white in shiny. You probably do not put too much thought into it but once you put the toothbrush into your hand you go on automatic and put the suggested amount of toothpaste. Another example are dishwashing liquids — make the whole in the tube a bit bigger and the customer goes on frenzy — uses 10–15% more ;)
8. Increase applications.
The prices your customer is willing to spend depends on the perceived value, so if the value is bigger he may be more incline to use your product more or simply pay more for it. A good example is Knorr with his bouillon — they try to show you 200 applications of it to inspire you to use it more. KFC is doing similar work — they show you that the chicken can be part of quesadilla or a tasteful salad. In on-line world a good example is Google drive — can be used as a CRM, a tool to work from distance or simply store files in the cloud.
9. Longer and cheaper contract.
Almost every SaaS operating in a subscription model will give you lower price / better terms if you pay for the whole year upfront. From the point of view of the customers he has gained some money and….lost 11 opportunities to switch to another product.
10. Eliminate friction.
By friction we mean all the small distractions, complications that makes the usage of the product or paying for it (extending the contract) a pain in the ass. A nice example of friction-full process we have in Poland in the healthcare. When you appoint the visit at one of healthcare providers you have to confirm it TWICE with TWO separate documents. It’s good that they do not ask you for your tax declaration ;). The fewer frictions the bigger chance that the customer will stay longer with you and will have higher perceived value of the product. Go to the article by Kissmetrics to see how to lower friction on your webpage
11. Better onboarding
Better onboarding stands for showing the customer how to use your product and how to get value out of it. This means that you should have tons of movies on how to use your product, a blog, some sort of a live chat on your webpage, drip mailing for the newcomers which will explain them what and how to do. The best examples how to do it properly are Canva, GetResponse, Pinterest, DropBox It is worth incorporating some elements of gamification to stimulate the learning process (i.e. DropBox gives additional memory for implementing some of the suggestions)
12. Better customer product.
Customers look at the value proposition you deliver through your product but for them of huge importance is how you support them. Crappy customer service can kill even the best product. With great customer service and average product you can go a long way. To know what to improve make research what do they complain about, what do they need etc. (more on market research you will find in this on-line course: Market Research in practice). Out of this you should get a list of projects — always start with the ones that will give you biggest impact at the lowest cost. Good example how to do it you can find in the Gagan Biyani presentation, co-founder of Udemy, that tells how he has achieved excellent customer experience at Lyft and Sprig.
13. Shorten the time needed for clients to use your product.
Customer value time over money and if you make a product that does something faster for them they may be inclined to spend more. Try to make everything as easy and as automatic as possible. Look at how your product is used and for what by the customer. That knowledge will help you to build the value properly. Good example of good execution of this principle is GetResponse that introduced in his solution for mailing possibility to build simple landing pages. Another good example is Amazon with his 1-click payment.
14. Sell in bulk.
Try to sell your product in bigger packages. If you are selling something physical that will give you huge opportunities for two main reasons: customer who buy bigger packages use up faster and more product; customer will think less frequently about the product (no need to refill) so he will be blind to the communication done by your competitors
15. High costs of switching.
Use the stick and carrot method. The stick in this case could be the fee he has to pay once he decides to terminate the deal (again have a look at the mobile operators). The same principle is used by companies renting commercial space.
16. Loyalty program.
You might thing that people are fed-up with collecting points and badges but still on average in developed countries a person would be participating in 8–12 loyalty schemes. In fact loyalty program gives you easy and cheap access to your customers thanks to which you can conduct intensive communication and stimulate him on many occasions. It also gives you huge knowledge on their behavior and you can conduct nice segmentation. Combine it with big data analyses and you can increase significantly the value of your average customer. We recommend also incorporating gamification here. Have a look at examples how to use gamification. If you are in e-commerce, B2C services and products loyalty program is a must. Avoid multibranding programs — they do not create too much value for you.
17. Create a fashion around your product.
The idea of your product being more fashionable or more like fashion products should be appealing to you as it speaks to the emotional part of the human being. This part usually spends more so …… go for it tiger ;). Great examples are shoes — if you would have treated it only through its functional usage you would buy maybe 4 pairs. Once it is fashion, way of expressing yourself 40 pairs seems more likely appropriate to have. You can turn your product into fashion even if it is dull like hell — best example is IKEA, car producers, mobile phone producers or cards with the name of players. Whenever you introduce the fashion concept people start consuming more, collecting and expressing themselves through the product (the most recent examples are tattoos)
18. Shorten the life of your product.
Customer can use the product beyond its designed lifespan — you have guys walking in socks with holes, people using toothbrushes for years. That is not good for the customer and is not good for the business as well. You have two groups of methods of tackling it. First one, softer revolves around communicating the optimal time of usage i.e. “Dentist recommend to change your toothbrush every 3 months”. Second group is stricter — you set up an expiry date — trust me that scares the customers. For on-line products the equivalent is setting up shorter trial periods (i.e. for SaaS products) or generating coupons with shorter time to use them (e-commerce).
19. Create community.
If you are lucky and your product is great you will have copycats in no time. Therefore, create a community around your product that supports the users and of course your brand. They may also create additional value to your products: suggestion how to modify your product, reviews and recommendation etc. Products with strong community are used longer because the customer is emotionally attached to it. The best examples are Wikipedia, Reddit (despite recent problems with the community) or Wordpress, where most of the product is created by community itself