What is Customer Lifetime Value (CLV)?

Customer Lifetime Value (CLV) is a metric that represents the total amount of revenue or profit a business can expect from a single customer throughout their entire relationship with the company.

CLV helps businesses understand the long-term value of their customers, guiding decisions related to marketing, sales, customer service, and product development.

It emphasizes the importance of retaining customers and maximizing the value of each customer relationship over time, rather than focusing solely on short-term transactions.

It is calculated simply as:

What is a good CLV?

Why is CLV so Important?

CLV is important because it provides long term profitability and gives a comprehensive view of the value a customer brings to a business, enabling more strategic and customer-centric decision-making.

This has several knock-on effects that will help improve your business and provide more value to your client.

 How to Increase CLV

The fundamental principle in boosting Customer Lifetime Value (CLV) is to deepen the relationship with your customers by consistently providing exceptional value, personalized experiences, and solutions that meet their evolving needs.

The strategies outlined below are not mere tactics to extract more revenue from your clients. Instead, they are approaches to enhance the value you deliver, which in turn fosters stronger relationships and drives long-term profitability.

While there are numerous methods to increase CLV, focusing on customer satisfaction and retention is the most straightforward way to achieve lasting results.

Addressing customer needs proactively and exceeding expectations are key factors in maintaining a loyal customer base.

As you explore these strategies, challenge yourself to consider how each one can be adapted to your business context. The real magic lies in experimenting with these ideas, testing their effectiveness, and crafting a cohesive strategy that maximizes CLV.

Let's get to the strategies!

Post-Purchase Follow Ups

Post-purchase follow-ups are a crucial strategy for increasing customer lifetime value (CLV).

By reaching out to customers after a purchase, businesses can express gratitude, offer additional support, and encourage feedback. This not only enhances the customer experience but also opens the door for further engagement.

By addressing any concerns promptly and providing relevant recommendations, businesses can foster loyalty and increase the likelihood of repeat purchases.

Effective follow-ups can turn a one-time buyer into a long-term advocate, significantly boosting CLV.

Types of post-purchase follow-ups include:

1. Thank You Email: Express gratitude for the purchase.
2. Order Confirmation: Provide order details and expected delivery.
3. Product Care Tips: Offer advice on maintaining the product.
4. Feedback Request: Ask for reviews or ratings.
5. Cross-Sell & Upsell - Offers for similar products that would be most useful to your client.
6. Reorder Reminders: Suggest repurchasing consumables.
7. Exclusive Offers: Present special deals or discounts for future purchases.
8. Win-Back: Entice a customer who hasn't bought for a while to come back and buy something again.

Each follow-up type can be tailored to the customer's journey, enhancing their experience and encouraging repeat business. You can send these in an email flow, snail mail, or your own follow up process.

Upsell & Cross-Sell Techniques

As I've shown in the How to Increase Your AOV guide, implementing upselling and cross-selling techniques is a powerful way to boost average order value, but you can also use this technique to boost customer lifetime value. 

To make this easy, upselling involves suggesting higher-end products or upgrades, while cross-selling recommends complementary items.

Let's say you own a musical instrument shop, and you have a beginner client who wants to buy a guitar. He is a true beginner, and a beginner guitar is the right fit.

At the time of sale, you will add cross-sells for an amp, picks, tuner, strings, and a case because these are essential to your client's beginners journey. You also cross-sell the customer a guitar 6-month lesson package because you know this is an essential part of your client's success journey. You've just maximized the value that you can bring to this client while boosting your AOV.

How does this translate to customer lifetime value?

Well, you know that 80% of your beginners that also take your lessons package actually learn to play the guitar and will want to upgrade in as they get better. You also know it takes about 6 months of lessons for most of your clients to know all the basic chords and to be able to play basic songs. 

Knowing this, you'll start the upselling process at month 4.

First, by upselling the lessons package for an additional 6 months or year. 

Second, you'll upsell to a better guitar. You'll make this an exciting point of your client's journey by showing them their significant progress and how it is now time for a better guitar, more suited to their new skill level.

These strategies work together to increase average order value, customer lifetime value, and also enhance customer satisfaction creating a trusting relationship between business and client.

By analyzing purchase history and customer preferences, businesses can offer relevant and personalized recommendations, leading to increased loyalty and repeat purchases.

Replenishment

Balance Me, a skincare brand started by sisters Clare and Rebecca Hopkins, did just this.

They sent targeted replenishment emails based on customers' likely repurchase intervals, reminding them to restock their favorite skin care products before running out. 

These replenishment emails, automated through Klaviyo's email automation suite, resulted in an 83% increase in repeat purchases.

Retention Specialists

Retention specialists are dedicated professionals focused on maintaining and enhancing customer relationships to increase customer lifetime value.

By analyzing customer behavior, identifying at-risk customers, and implementing targeted retention strategies, they work to reduce churn and foster loyalty.

Their efforts include personalized communication, addressing customer concerns, and offering tailored solutions to meet individual needs.

By proactively engaging with customers, retention specialists play a crucial role in ensuring long-term satisfaction and repeat business.

Statusbrew, a SaaS company, reduced customer churn by 20% through various strategies including the integration of live chat to proactively address potential customer issues, redesigning their cancellation page to gather insights on churn reasons, and integrating a Slack notification system to quickly respond to cancellations.

Consultative Sales Training

Consultative sales training equips sales teams with the skills to understand customer needs and offer solutions that add real value.

This approach fosters trust and establishes a salesperson as a knowledgeable advisor rather than just a vendor.

The training focuses on active listening, problem-solving, and product knowledge that can be leveraged to suggest products that genuinely meet the client’s needs.

By adopting a consultative selling method, companies can enhance the customer experience, thereby increasing customer retention and lifetime value.

Scientifica implemented the SPIN Selling Consultative Sales Training for their global sales team.

As expected, they saw an immediate increase in sales conversion and increases in revenue on the front end.

However, this training will provide you sales team with the skills to recognize after sale and follow up sale opportunities and how to convert these better for a win in the CLV column!

Investing in Employee Training

Investing in employee training is fundamental to increasing customer lifetime value.

Comprehensive training programs ensure that staff are well-versed in product knowledge, customer service excellence, and sales tactics.

This investment leads to empowered employees who can provide exceptional service, build strong relationships with customers, and contribute to a culture of continuous improvement.

Crutchfield, a 50 year old electronics retailer has embraced employee training. Each advisor receives 400 hours of paid training before they speak to a single live customer, including specific training for corporate sales (their biggest customers with the highest CLV). When one of Crutchfield's advisors learn that an inquiry is for business use, the client is immediately warm-transferred to a Crutchfield Business Account Manager that specializes in business sales.

Well-trained employees are the cornerstone of delivering experiences that keep customers coming back, thereby enhancing CLV.

Subscriptions

Subscription models offer a consistent revenue stream and enhance customer lifetime value by creating a predictable sales pattern.

They transition customers from one-time transactions to ongoing relationships.

This model can foster loyalty as customers invest in a brand regularly.

For businesses, it means a steady cash flow and a solid foundation for scaling services or products.

It's crucial to balance the value provided with the price to ensure customers remain subscribed and satisfied over the long term.

Source: 2020 McKinsey survey, % of Subscribers (entered with up to 3 answers)

The correct qualifier depends on the business and product lineup. Test each offer to see which is best suited for your business.

Take Dollar Shave Club for example, they competed in a traditional consumer goods market. However, by offering high value, good pricing, and convenience through their innovative subscription model, they were able to retain 25% of customers after six quarters.

Memberships

Membership models build on the concept of exclusivity and belonging, which can effectively enhance customer lifetime value.

By offering tiered membership levels with varying benefits, businesses can cater to different customer segments, providing an avenue for customers to choose how they want to engage with the brand.

These models encourage repeat purchases by offering members-only discounts, early access to new products, or special services.

Effective membership programs create a sense of community and privilege, increasing customer retention and long-term brand loyalty.

Different types of membership models include:

Need some inspiration? Here's an example of how each of these types of memberships are being utilized by real companies.

1. Loyalty Memberships: Starbucks uses a points-based system where customers earn stars for purchases, redeemable for free drinks or food.
2. Tiered Memberships: Marriott's Bonvoy program offers tiered membership levels with exclusive hotel benefits based on the number of nights you stay in a year
3. Premium Memberships: LinkedIn Premium provides enhanced networking tools, additional profile insights, and learning resources beyond its free offering.
4. Freemium Models: Spotify offers a free, ad-supported music streaming service, with the option to upgrade to Spotify Premium for ad-free listening and additional features.
5. Community-Based Memberships: Tiger 21 is a community based membership group for Entrepreneurs and High Net Worth individuals.
6. Subscription-Plus Memberships: Amazon Prime includes subscription benefits plus exclusive deals for members.

Each model offers unique advantages and can be tailored to different business goals and customer segments. How can you implement this in your business?

Annual Billing

Annual billing models encourage long-term commitment by offering a discounted rate for paying upfront for a year of service.

This benefits both the customer, who enjoys savings, and the business, which gains upfront cash flow, reduces transactional costs, and most importantly, lowers churn. 

By incentivizing customers to commit for a longer period, companies can improve retention rates and stabilize revenue streams.

 In an absolutely fascinating must-read article by Julian Winternheimer of Buffer, he shows how Buffer's LTV is $267 for monthly customers and $507 for annual customers.

Julian makes the case that while they may have the same number of customers at the end of the year, it is the time in between that makes the most difference.

That the extra few months before cancellation due to the annual plan gives them an extra couple of months of revenue from a customer before they churn than if they would have cancelled say in the middle of the year. This is significant.

This model can also simplify the customer's budgeting process and enhance their perception of value over time. 

While this technique is very successful in SAAS businesses, the truth is that it can be utilized in many different businesses to the same effect.

Tiered Pricing

Tiered pricing is a strategy that offers products or services at various price points to cater to different customer segments.

This model can increase customer lifetime value by providing options that meet diverse needs and budgets.

Customers can choose a level that suits them, often starting at a lower tier and upgrading as they see the value.

One of my favorite tiered pricing methods is Good, Better, Best. While often used in SAAS businesses, it can be adopted for a wide range of businesses where differing levels of service or value can be provided.

I was excited when I found this example in the wild. Our veterinarian utilized Good, Better, Best as part of their pet care offering. 

For businesses, tiered pricing can attract a broader customer base and encourage users to move to higher tiers over time, thus driving revenue growth.

Another example of Good, Better, Best is Patrón Spirits’ launch of Roca Patrón tequila, produced via a traditional tahona process. 

This premium product, positioned as the 'Best' offering at over $69 a bottle, not only met its sales expectations but also contributed to an increase in the perceived value and artisanal image of the entire Patrón range. 

As a result, sales of Patrón's more affordable 'Good' and 'Better' offerings saw a sharp increase, demonstrating how a well-executed G-B-B pricing strategy can enhance a brand’s prestige and potentially raise customer lifetime value (CLV) by enriching customer perception and encouraging upward sales migration within the brand.

Financing

As I've shown previously, financing is a clear average order value booster. By allowing your clients to finance, they can afford to make larger purchases and spread the payments out over time.

Sales Events

Sales and discount strategies can significantly impact customer lifetime value by incentivizing repeat purchases and attracting new customers.

In today's retail landscape, consumers are increasingly seeking out deals and discounts, motivated by factors like inflation and economic concerns.

The rise of retail sales events beyond traditional holidays, such as Amazon Prime Day and Nordstrom's Anniversary Sale, reflects this shift in consumer behavior. 

These events offer unique opportunities for savings, driving significant revenue for retailers. Beyond immediate sales, these events play a crucial role in building long-term customer loyalty in a competitive market.

Strategic discounting, such as time-limited sales, can create urgency and boost sales volume, and most importantly, get customers to your store. 

Offering discounts to loyal customers, or offering a single day large sales event can enhance the perceived value and deepen customer relationships without eroding the brand's value proposition.

The implementation of retail sales events can drive Customer Lifetime Value (CLV) by offering consumers enticing opportunities to engage with the brand multiple times throughout the year. By creating memorable experiences and providing exclusive incentives, retailers can foster a sense of loyalty and encourage repeat purchases, ultimately increasing the CLV of their customers.

Win-Back Campaigns

The win-back campaign is a marketing strategy aimed at re-engaging and reactivating former customers who have stopped purchasing from a company or using its services.

The goal is to win back these customers by addressing their concerns, offering incentives, or highlighting improvements made since their last interaction.

These campaigns often involve personalized communication, such as targeted emails or direct mail, and can be a cost-effective way to increase customer retention and loyalty.

Let's look at an example from Marley Spoon, a meal delivery service.

Marley & Spoon partnered with LOB, a direct mail automation company, to build an automated win-back, or reactivation campaign, utilizing direct mail with incredible results.

Marley & Spoon realized a 20% conversion in reactivation driven by direct mail. That is a huge win.

However, they went a step further. Because they test their marketing channels, they also found that their direct mail campaigns converted a whopping 263% higher than their email campaigns.

Most companies rely only on email for their win back campaigns. This case study shows that direct mail win-back campaigns can be a huge boost to conversions or the perfect add-on to your email campaigns. 

It also shows that you should test, test, test!

Create a Feedback Loop

Creating a feedback loop is crucial because it allows a company to gather insights directly from customers, enabling continuous improvement of products and services.

To create a feedback loop, businesses can use surveys, social media, customer service interactions, and product reviews.

Analyze this feedback to understand what your business does well, not so well, and what failure points you may have.

Then, act on this feedback to make improvements to your business.

Blake Morgan is a expert in customer experience, and she described how Emirates is regularly recognized as the best airline in the world by constantly improving their customer experience by listening to their clients, investing in changes, and seeking more feedback to be in a state on constant improvement..

Emirates invested $2 billion to improve its in-flight experience. Here are some of the initiatives they made:

This process increases customer lifetime value (CLV) by demonstrating that the company values customer input, leading to enhanced satisfaction, loyalty, and a greater likelihood of repeat purchases and positive referrals.

Enhanced Onboarding Process / Customer Success Programs

An Enhanced Onboarding Process or Customer Success Program is designed to set expectations, ensure a smooth and positive experience for new customers, and provides them with the necessary resources and support to effectively use or get the most out of your product or service.

SAAS companies have mastered onboarding. Why? Because they live and die by client churn. Their success depends on keeping the client as long as they can. 

Every business should study what SAAS companies are doing so they can implement a tailored version of this process for their own company.

For example, Cintas, created an onboarding video to explain to their process to customers, explaining their customer journey and accurately setting client expectations.

A video alone won't cut it. You need to have systems in place to ensure you follow your process.

For instance, accounting firms often use an onboarding checklist to ensure their clients are onboarded correctly and to ensure all contracts are signed, paperwork filed, and requested documents are received.

An onboarding approach can increase customer lifetime value (CLV) by reducing churn, fostering loyalty, and encouraging long-term engagement with your brand.

Developing New Products/Services

Developing new products or services  can significantly increase customer lifetime value (CLV) by offering fresh solutions that meet evolving customer needs.

By innovating and expanding the product range, businesses can attract new clients while encouraging existing ones to make additional purchases.

New products can also reinvigorate customer interest and engagement, leading to increased brand loyalty and repeat business.

SharkNinja, a small appliance company started in 2008 with just one product, there no loss of suction vacuum.

By listening to their customers' needs and continually developing and launching new appliances, they have grown from $250 million in sales in 2008 to $3.7 billion in 2022.

Once a client comes to "know, like, and trust" your brand, they are more likely to buy more products from you.

I'm a perfect example. I have a Ninja coffee maker. When my wife wanted an air fryer, my search landed me among a few names I didn't know and a Ninja. I bought the Ninja brand. Why? Because it has a cool name? No. I trusted the brand.

It doesn't matter if you are a product company or a service company. Adding new products and services gives your client additional ways to buy from you, a brand they trust. Launching new products and services to your customer base is a surefire way to boost CLV.

Develop Accessories for Your Current Product Line-up

If you've read my article on increasing average order value, you already know developing accessories for current product line-ups can boost your AOV at time of sale by offering upsells and cross-sells.

This same technique can also enhance customer lifetime value (CLV). Your client may realize that they need an additional item in order to enjoy the best use your of your product. Offer complementary items that enhance the overall user experience of your product or service.

Accessories can provide additional functionality, customization options, or aesthetic appeal, encouraging customers to make additional purchases.

This includes things like: 

Accessory sales also strengthens brand loyalty as customers invest further in the ecosystem.

Note, this isn't only for big companies. Really stretch your thinking to think how your company could incorporate complementary products into your offering. A few more examples:

1. A BBQ pit manufacturer adds BBQ pit covers, replacement parts, and grilling accessories
2. An electronics store adds home installation services
3. An accounting firm adds part time CFO services, cash flow management, review and assessment of KPI's

The possibilities are endless.

By continuously updating and expanding the accessory range, businesses can keep their product line fresh and relevant, driving repeat purchases and long-term customer engagement.

Sell Other Company's Products that are Complementary to Your Offering

I get it. developing new products is hard. 

Selling complementary products from other companies can increase customer lifetime value (CLV) by offering a broader range of solutions that meet diverse customer needs.

And this is much easier to set up than you think. Let's say you're a hitting coach for young baseball players.

You only offer hitting lessons so you're earning potential is limited. You can increase your customer lifetime value by offering to sell your clients additional gear. You can fit them for the perfect bat, sell gloves, and branded gear.

You can partner with other coaches that do not do hitting lessons, and package other types of lessons like pitching, catcher lessons, or fielding. 

Think of all the things your customer needs to accomplish their goal of using your product or service. Chances are, you're just a small part of the overall solution.

Then make out a list of potential partners that could fill this need.

In the online world, this is done all the time. Clickbank and Shareasale have entire marketplaces for digital products that can be resold for a commission. I've personally owned two Amazon affiliate websites as well.

The thing to remember is that this isn't just a online opportunity. You can create these partnerships in almost any industry you can imagine.

Here's an example of a dog boarding company:

Dog Boarding Partnership Example

If your client cares enough to board their dog, they don't just want to board their dog. They care about their dog's well-being.

This opens up a lot of opportunities for you to offer additional services. You can add: 

Now, let's say you own a small location. You can't do any of these in house. What do you do?

You partner! Find a mobile groomer. Find a nearby veterinarian and either taxi the pups there or have the vet come to you. Have a trainer come in 3 days a week to give lessons.

Each of these is a win-win scenario for the 3rd party and you.

Energy Industry Partnership Example

CenterPoint Energy services a large part of Texas, Louisiana, and Mississippi natural gas customers.

They could have stopped there, but they partnered with HomeServe USA to offer insurance for their client's gas lines.

With more than 7 million clients nationwide, I'm sure they made a good amount of shared revenue with this partnership while also lowering their client's risk of an unexpected bill to repair their gas lines. Win - Win.

This strategy can enhance the customer's experience with your brand, as they can find a one-stop solution for related products. It also opens up opportunities for cross-promotions and partnerships, expanding your market reach.

By providing a more comprehensive offering, you can increase customer satisfaction, encourage repeat purchases, and strengthen brand loyalty, all of which contribute to higher CLV.

Acquire Companies Who Offer Products or Services that are Complementary to Yours

Acquiring companies whose products are complementary to your offering can significantly increase customer lifetime value (CLV) by expanding your product portfolio and reaching new customer segments.

FitLife, a fictional high-end exercise equipment manufacturer, could explore these 8 different areas as possible acquisition targets to expand their CLV and expand their product line, add cross-selling opportunities, boost customer retention, and obtain economies of scale.

This strategic move allows you to offer a more comprehensive solution, enhancing customer satisfaction and loyalty.

It also opens up cross-selling opportunities, as existing customers may be interested in the newly acquired products.

I did just this in 2015, for my very first acquisition. I acquired a t-shirt and hat company that was selling humorous apparel for oilfield workers to utilize as a backend product to my existing oilfield duffel bag business.

This gave us additional products to offer our customer base, increasing average order value, customer lifetime value, and overall revenue. Even better, we acquired a whole new customer list, and were able to sell them our duffel bags, too.

By integrating complementary products into your offering, you can create a more seamless customer experience, leading to increased repeat purchases and a higher CLV.

Implement a Loyalty Program

Implementing loyalty programs can significantly increase customer lifetime value (CLV) by rewarding repeat purchases and fostering long-term customer engagement.

Today, and especially online, consumers can buy from just about anywhere. Loyalty programs give them an incentive to shop with you to earn their points or rewards, actively seeking you out rather than your competitors.

These programs can take various forms, such as:

• Points-based systems (Example: Sephora Beauty Insider)
• Tiered rewards (Example: Marriott Bonvoy)
• Value based rewards (Example: Lego Insiders)
• Subscription based (Example: Amazon Prime)

Ulta Beauty Rewards

I just had to share Ulta's Beauty Rewards program with you because they it generates some of the most AMAZING numbers.

Ulta's rewards program has over 42 million members. That's 11 million more than Starbucks. Crazy, right?

Even more impressive, Ulta CEO, Dave Kimball said, "95% of sales go through our loyalty program."

By offering tangible benefits for continued patronage, loyalty programs encourage customers to return, increasing their lifetime spend with the brand.

Additionally, well-designed loyalty programs can enhance customer satisfaction and brand loyalty, leading to positive word-of-mouth and attracting new customers.

Implementing Referral Programs

Offering a referral program can increase customer lifetime value (CLV) by turning satisfied customers into brand advocates.

When customers refer friends or family, they not only bring in new business but also demonstrate their loyalty and trust in your brand.

Everyone has heard about the famous DropBox referral campaign which resulted in growth of over 3,900% in 15 months.

So, let's look at a different industry and a remarkable case study from 24-Hour Fitness.

Knowing that people often are more consistent and stay members longer when they have a workout buddy with similar fitness goals, they wanted to implement a Refer a Friend campaign.

24-Hour Fitness already was using mailers, and were looking for a lower-cost way to run this campaign. They created a social media campaign that allowed customers to send their friends personalized "free passes" which resulted in 330,000 referrals in the first 3 months of the campaign.

While this campaign only rewarded the referred party, referral programs often reward both the referrer and the referred, enhancing the customer experience and encouraging repeat business.

This creates a virtuous cycle of growth, as each referred customer has the potential to become a new advocate, further increasing CLV.

Offering Exclusive Benefits for Whales

Offering exclusive benefits for your highest spending customers can significantly increase customer lifetime value (CLV) by fostering loyalty and encouraging continued engagement.

By providing perks such as discounts, early access to new products, or personalized services, businesses can create a sense of exclusivity and appreciation.

No one knows this better than casinos. They know a thing or two about how to treat their high rollers, or "whales."

Whales are your biggest spenders. The patrons who spend the most money with you. In the casino world, whales will spend $250,00k to $1,000,000 or more in a single weekend.

And casinos, will go to great lengths to get these players in their casinos.

You may have heard about free, or comped, rooms. That's just the beginning. Whales get suites. Not just any suites, I'm talking luxurious, 4-story, 10,000 square foot suites that rival any mansion.

I'm talking free Rolex's, private airfare, $100k of free promo chips, discounts on losses, luxurious dinners with famous chefs and world class entertainment, exclusive private gaming rooms just for high rollers and celebrities. Plus, they're concierge can find you just about anything you would want.

Casinos see profit margins increase when whale walks in the door. They do everything they can to entice more of these players to their casino.

When was the last time you looked at the whales in your business? What are you doing to find more clients like them?

Offering exclusive bonuses enhances the customer experience but also motivates your whales to continue their relationship with the brand, leading to increased repeat purchases and a higher CLV.

Content Marketing

Content marketing can increase customer lifetime value (CLV) by providing valuable information that educates and engages customers.

By creating relevant and high-quality content, businesses can establish themselves as industry leaders, build trust, and foster a sense of loyalty among their audience.

Content marketing is a broad subject. Your content can be educational or simply to entertain, or both. Whichever path you choose, the goal is to continue building a relationship with your client.

Blendtec's "Will it Blend?" campaign is a classic entertainment example. Blending everyday objectives to show their blender is one durable son of a gun.

If I was in the market for a blender, I'd certainly be compelled to buy the one that can blend an iPhone.

Content marketing is not new. Not the oldest example by any means but one of my favorite educational content marketing examples is The Furrow, by John Deere.

In 1895, John Deere launched The Furrow, a agricultural magazine that grew to 4,000,000 subscribers in 1912 and distributed through their dealer network.

The magazine was not a catalog simply used to sell more equipment. It was an educational tool showing farmers new technologies and techniques to help them become more successful farmers and business owners.

This approach enhances John Deere's brand perception and ultimately leads to increased customer retention and higher CLV.

Effective content marketing strategies include blog posts, videos, infographics, and social media content that resonate with the target audience's interests and needs.

Customer Education

Customer education can increase customer lifetime value (CLV) by empowering customers with the knowledge to make informed decisions and use products effectively.

Educated customers are more likely to appreciate the value of your offerings, leading to increased satisfaction, loyalty, and repeat purchases.

IFIXIT does this by offering repair guides for just about any type of device.

Let's say you want to replace your phone battery. You find IFIXIT's repair guide. Feeling confident, you buy one of their repair kits. Feels good to fix things yourself!

2 months later, your kid's Nintendo Switch controller has issues. What do you do? You go back to IFIXIT and find that guide. Now, anytime something breaks you go back to IFIXIT. Anytime you need a new tool set, you buy from them. They've earned your trust and your business.

Providing tutorials, how-to guides, and informative content helps build a strong relationship with customers, as they perceive your brand as a helpful resource.

This trust and confidence translate into long-term customer engagement and a higher CLV.

Offer Valuable Information & Content

Offering valuable information and content can significantly increase customer lifetime value (CLV) by establishing your brand as a trusted authority and resource.

When customers find your content helpful and informative, they are more likely to return for future needs, recommend your brand to others, and make additional purchases.

For example, I got my first gym membership the day I turned 13, the minimum age requirement for my hometown gym. I've been an avid fitness enthusiast my entire life. After a car accident, I had constant shoulder pain and could hardly lift. I worked around this energy for a decade or more.

One day, I stumbled upon this video. 

After following the recommended routine, my shoulder pain was gone.

Jeff Cavaliere, had tons of videos - everything from fixing pain to complete workouts. Intrigued, I visited his website and found that he offers workout programs that incorporate the weight lifting I love with mobility exercises which I needed.

I tried the first program, loved it, and have now bought just about all of his training programs.

This example shows how demonstrating your knowledge can earn you the first sale, and then, turn that customer into a customer for life.

Too many business owners think that giving away their knowledge for free means they will lose customers. The truth is, the people that give away their knowledge freely earn their client's trust, and those clients are lining up to buy their stuff or work with them.

By consistently providing high-quality content, you can create a loyal customer base that sees your brand as an indispensable part of their lives.

Customer Training Programs

Customer training can increase customer lifetime value (CLV) by enhancing the customer's ability to utilize your products or services effectively.

Well-trained customers are more likely to experience satisfaction and success, leading to increased loyalty and repeat purchases.

Companies with highly technical products have to do this by default.

Take RobotIQ for example. They build robots that can do palletization, load CNC machines, screw in screws for product assembly, and more. Customer success is paramount to their business. They've produced some amazing training programs to ensure that products know how to use their new robots, and are successful.

In the software world, ensuring your customers know how to get the most out of your tools can make or break customer lifetime value.

AHREFs Academy does this well. It teaches a highly complicated subject (SEO), and also shows you how to best utilize AHREF's to achieve your SEO goals.

By offering training sessions, workshops, or online tutorials, you can empower customers with the knowledge and skills needed to fully benefit from your offerings.

This investment in customer education fosters a deeper connection and commitment to your brand, ultimately boosting CLV.

Want to take it even further? You can charge for advanced training and courses to boost your customer lifetime value even further!

Educate Clients About Your Products

Educating customers about your products can increase customer lifetime value (CLV) by enhancing their understanding and appreciation of your offerings.

When customers are well-informed about the features, benefits, and potential uses of your products, they are more likely to make informed purchasing decisions and utilize the products to their fullest potential.

This leads to greater satisfaction, loyalty, and a higher likelihood of repeat purchases, all of which contribute to an increased CLV.

Take Sonos for example. They aim to simplify a complicated product - which is kind of funny because their product is wireless home theater systems - simplifying installation by not having to run speaker cables.

They provide gobs of educational material on their website to teach you how it works, what you need, and to show you that it really is simple.

The mass amount of product education will help the client understand the technology, sell them on it, convince them of the ease of use, and ultimately help to land the sale.

So, how does this help with CLV?

Well, not everyone can afford to buy an entire home surround system at once. So they also help build out your system one piece at a time.

By starting with a sound bar, the client gets their first taste of high quality sound and ease of install. 

Then, they'll buy a subwoofer. Then surround.

Sonos builds a customer journey that starts with product education.

Highlight Customer Success Stories

Highlighting customer success stories can increase customer lifetime value (CLV) by showcasing real-life examples of how your products or services have positively impacted other clients.

This is especially helpful for companies with multiple products or service lines.

We've all heard that it is far easier to sell to an existing client than to acquire a new one. The truth is, your client may have a problem that you could readily solve, but they don't even know you can help them.

This is where Customer Success Stories really shine. When a client sees your Customer Success Stories, they see other ways you can help them that they may not have even though about.

In my company, we sell advanced robotic inspection services. Every quarter, I send out a inspection highlights email showing the most interesting inspections we've done for our clients across the globe. This email always gets a positive response and often elicits a "Wow, I didn't know ya'll did that.", a follow up meeting to discuss new services, or a immediate request for proposal.

Here are two more examples:

EcoLab is a company that develops and offers services, technology and systems that specialize in treatment, purification, cleaning and hygiene of water in a wide variety of applications. Their products span across at least 16 different industries.

They've developed a database of Customer Success Stories showing 142 projects.

This helps on two fronts:

1. A new client gains a sense of trust by seeing all the projects they've completed.
2. A current client sees new ways a company they already like and trust can help them.

Here's another example:

American Trucks is a premier destination for aftermarket F-150 truck accessories.

Modifying a your truck isn't cheap, and clients want to make sure they're going to like their part before they put it on. 

American Trucks has built a product gallery featuring over 10,000 installs from their customers. You can choose just about any part, and see what that part would like on a truck similar to yours.

 Like many of these techniques, this technique can both improve average order value and customer lifetime value. Why?

These stories build trust and credibility, demonstrating the value of your offerings. They can inspire potential and existing customers, encouraging them to engage and buy more from your brand.

Build Strong Customer Relationships

Building strong customer relationships will get customers to buy from you and continue to come back for a long time.

And when I think of strong customer relationships, the first company that comes to mind is Harley Davidson.

Harley manufactures and sells an iconic motorcycle.

Harley Davidson owners are cult-like (in a good way) and fully immerse themselves in the lifestyle. They wouldn't dream of buying another brand.

And Harley has done a lot of work with their brand to ensure that the customer relationship is strong:

The Harley Owners' Group (H.O.G.) is one of the largest manufacturer sponsored riding clubs in the world - bringing together Harley riders from around the globe with meet-ups and rallies.

By understanding your customers, and actively listening and responding to feedback, businesses can create a sense of trust and loyalty that far surpasses any of your competitors.

Along with local chapters, a H.O.G. membership provides plenty of other benefits such as:

Harley's storytelling, legacy, and heritage appeals to their riders and give them a sense of belonging.

And when it comes to customer lifetime value, Harley owners buy Harley branded apparel, and continue to customize their bikes with Harley Davidson aftermarket parts.

These types of client relationships certainly lead to higher customer lifetime value (CLV) as satisfied customers are more likely to make repeat purchases and recommend the brand to others.

Fostering a positive, long-term relationship with customers is key to driving sustained revenue and growth.

Foster Community Engagement

Fostering community engagement involves creating a platform where customers can interact, share experiences, and connect with the brand. This can be achieved through social media groups, forums, or events.

A good example is Powell's Books.

Powell's Books, based in Portland, Oregon, is one of the largest independent bookstores in the world and is renowned for its strong community ties and innovative customer engagement strategies.

Powell's hosts numerous author events and book readings, ranging from local authors to international bestsellers. These events are central to community engagement, providing a space for readers to meet their favorite authors, engage in literary discussions, and connect with other community members who share similar interests.

Here's a sample of their author events, but note - this page has events planned out for the next 3 months!

Powell's doesn't stop there. They also:

In a time when it is easier than ever to just buy a book from Amazon, Powell's has built a customer relationship where their clients wouldn't think of buying a book from anywhere else.

Fit4Mom is another extraordinary example of community based, high-engagement businesses.

Offering fitness classes for moms at various stages of motherhood, Fit4Mom has built a strong community by providing a supportive environment for mothers to connect while staying active. They host regular meet-ups, mom's nights out, and family events, fostering a community centered around health and family.

Engaged communities lead to higher customer lifetime value (CLV) as members feel a sense of belonging and loyalty to the brand. Simply put, they stay around longer.

They are also more likely to become brand advocates, spreading positive word-of-mouth and attracting new customers to the community.

Utilize Brand Ambassadors & Cross Promotion

Clients can utilize brand ambassadors and cross-promotion by partnering with individuals or businesses that align with their brand values.

Brand ambassadors can help spread the word about the brand through their networks, increasing visibility and credibility.

Pura Vida Bracelets uses a mix of college ambassadors and Instagram influencers to promote their hand-made bracelets. Their ambassadors, who typically embody the laid-back, beach lifestyle that Pura Vida promotes, create content that feels authentic and personal.

Pura Vida's Live Free Tour let's their clients follow along as their brand ambassadors dive into epic journeys from Greece to Mexico.

This approach helped them build a strong following and significantly increase their online sales from $1.5 million in 2013 to over $68 million in 2018 which was the peak of their ambassador program.

The ambassadors help increase customer engagement and retention by creating authentic content and engaging their personal networks. This builds a loyal customer base that grows through trust and personal recommendation, which is often more effective than traditional advertising.

Cross-promotion with complementary businesses can expose the brand to new audiences.

From a business to business perspective, Brooklyn Brewery, a craft brewery in New York, partnered with Murray’s Cheese, a gourmet cheese shop, to offer cheese and beer pairing classes.

This partnership helped both companies attract a food-loving audience interested in unique dining experiences, boosting attendance and sales at both venues.

Both strategies can lead to higher customer lifetime value (CLV) by attracting new customers and strengthening loyalty among existing ones, as they see the brand actively engaging with their community and interests.

Share Company Values, Updates, & Roadmaps

Companies such as Tesla & Apple are well known for their dazzling product launches and visions of the future.

By sharing their values, product roadmaps, their vision, and continuously keeping their audience updated, these brands are able to create an army of loyal enthusiasts who will not only be the first to buy but will continue to buy new releases over and over.

A company can share product roadmaps by providing updates on upcoming features, improvements, or releases through events, newsletters, blogs, or customer forums.

Sharing roadmaps can build transparency and trust with customers, as they feel informed and involved in the product's development.

 This can lead to higher customer lifetime value (CLV) by fostering a sense of partnership and loyalty, as customers anticipate new offerings and feel valued by the brand's commitment to keeping them in the loop.

Create Buyer Personas

Creating buyer personas involves researching and segmenting your target audience based on demographics, behaviors, and needs.

This process helps companies tailor their marketing and product strategies to specific customer segments.

In a strategic move to combat showrooming, a shopping behavior where customers visit a physical store to see our test out products, but then make their purchase online, Best Buy developed buyer personas that focused on different customer needs and shopping behaviors.

This included personas like:

• Barry: A high-income professional who wants the best products and expert service.
• Jill: A busy mom looking for practical technology solutions. 
• Buzz: Tech-savvy young males who are early adopters of technology. They enjoy exploring new gadgets and trends and often look for the latest gaming or entertainment equipment.
• Ray: A practical family man seeking good value for his money. He’s interested in reliable technology that can help with daily tasks and wants straightforward advice on products and services.
• Helen: A middle-aged woman who prioritizes convenience and ease of use. She's often buying for her family and appreciates knowledgeable assistance to make informed decisions quickly.

By aligning their in-store experience and online presence to these personas, Best Buy reportedly saw a significant increase in customer loyalty and retention, directly contributing to an increase in CLV.

Best Buy saw an 8.4% increase in sales in their customer-centric stores compared to the previous year. In one "Jill centric" store in Santa Rosa, they saw a 30% boost in Jill spending. The targeted approach allowed them to tailor their services and marketing, which significantly enhanced customer satisfaction and repeat purchases.

By understanding the preferences and pain points of different personas, businesses can offer more relevant and personalized experiences, leading to increased satisfaction, loyalty, and customer lifetime value (CLV).

Buyer personas provide a framework for targeted communication and product development, ensuring that resources are focused on meeting the needs of the most valuable customer segments.

Develop Custom Solutions

A company can develop custom solutions by deeply understanding client needs through direct communication, feedback, and industry research.

This involves creating tailored products or services that address specific client challenges.

Large companies do this all the time.

Siemens Mobility created a custom solution for Deutsche Bahn, the German railway company, by developing specific models of high-speed trains tailored to their operational needs and passenger comfort.

This partnership included long-term maintenance and service contracts, which not only ensured optimal train performance but also significantly extended the relationship between the two companies.

The KONG Original Impact Gloves were co-developed by Ironclad Performance Wear in partnership with the Oil and Gas Industry Safety Committee, which included representatives from ExxonMobil, Chevron, ConocoPhillips, Halliburton, and other industry leaders.

The primary goal was to address the high rate of hand injuries among workers in the oil and gas industry.

This custom solution positioned Ironclad Performance Wear as the default supplier for impact protection gloves to some of the largest energy companies in the world. As a product that wears out and needs to be repurchased, they significantly increased CLV selling millions of pairs of gloves.

Developing custom solutions can position a company as the preferred or exclusive supplier by creating a dependency on its unique products or services. Custom solutions are often so tailored to a client's specific needs that the cost or complexity of switching to another supplier is too high, thereby locking in the relationship and significantly increasing the client lifetime value (CLV).

Custom solutions can increase customer lifetime value (CLV) by demonstrating a commitment to client success, fostering a collaborative partnership, and ensuring that clients receive maximum value from the products or services, leading to higher satisfaction and loyalty.

Marketing Personalization & Customization

In a competitive market, personalization is the secret sauce to securing customer loyalty and driving up customer lifetime value (CLV).

Big companies, like Starbucks, have access to big data that allows them to build out sniper like personalization for loyalty programs and promotions.

But how about the little guys?

Here's and example of how one business infused personalization into its marketing strategies:

Framebridge offers custom framing for photos and artwork. They identified personalization as key to building customer loyalty and enhancing the customer experience.

Framebridge implemented several personalization strategies such as:

By implementing these personalized marketing techniques, Frambridge reported a doubling of their year-over-year revenue, a notable increase in their repeat customers (40% of total orders), and marked improvement in engagement rates.

Framebridge’s approach illustrates how small businesses can use personalization to increase customer loyalty and maximize CLV.

By addressing individual customer needs and preferences through segmented emails, custom promotions, and tailored content, they created a relationship where customers felt understood and valued, leading to a doubling in revenue growth and high customer retention.

Personalize the Shopping Experience

For online giants like Amazon, AI-driven product suggestions are a cornerstone of their strategy to enhance the shopping experience. This AI analyzes a customer's browsing history, purchase patterns, and even items in their cart to suggest other products they might like, effectively increasing the likelihood of additional purchases and, therefore, CLV.

How can small businesses use this trick?

Brick-and-mortar or service companies can apply similar personalization by using customer data to offer personalized services or product recommendations during in-store visits or service calls.

For example, my favorite local auto repair shop keeps track of the history of  vehicle maintenance and repairs and suggests specific services that align with the vehicle's maintenance schedule when it is time to do so.. This not only adds convenience for me the customer but also increases the chances of returning, contributing to a higher CLV. 

Here's another example:

Vinyl Me, Please, a subscription-based record club, curates and delivers vinyl records tailored to subscribers' unique tastes.

Customers fill out profiles describing their favorite genres and artists, and Vinyl Me, Please uses this information to curate monthly vinyl selections they will likely enjoy and offers exclusive pressings which are personalized to the tastes of their membership base. 

Subscribers can also access an exclusive member store that recommends records based on their previous purchases and browsing behavior.

The personalized curation process helps retain customers, encourages additional purchases, and grows the membership base through word-of-mouth referrals.

Personalize After Sales Services

To personalize after-sales services and increase CLV, a company can track the lifecycle of the product for each customer and offer timely services.

For instance, if a customer buys a high-end espresso machine, the company could send personalized maintenance reminders, offer on-demand virtual sessions with a barista to improve their brewing skills, or suggest complementary products like specialty coffee beans.

This tailored approach to after-sales service not only enhances customer satisfaction but also opens doors for additional sales, reinforcing the customer's loyalty and engagement with the brand.

Daikin Industries, a leading manufacturer of air conditioning equipment, is a great example of this. They’ve built their success on providing comprehensive and personalized after-sales services, like:

• Maintenance Contracts: Daikin offers comprehensive maintenance contracts tailored to their customers’ specific needs. This ensures optimal performance and prolongs the equipment’s lifespan.
• Technician Training: Their commitment to training technicians ensures they provide the highest standards of service, keeping customers satisfied and confident in the company's expertise.
• Customer Support Center: Daikin runs a dedicated customer support center to assist with any issues, helping customers resolve problems quickly and effectively.
• Energy Efficiency Audits: As part of its after-sales maintenance services, Daikin conducts energy efficiency audits to help customers optimize their energy consumption, leading to long-term savings.

These personalized after-sales services have yielded significant results in customer retention, reputation, and revenue growth from aftermarket services.

I know Daikin Industries is a huge company, but even small HVAC service companies can offer similar after sales and maintenance contracts to increase customer retention and their bottom line.

A Personalized Educational Roadmap

Personalized content in the context of educating customers can be a potent tool for nurturing a deeper relationship with them.

By providing learning resources tailored to how a customer uses a product, companies can guide them towards realizing the full potential of their purchase.

This educational approach not only adds value but also builds a pathway for future sales, enhancing customer lifetime value.

A real-world example of this strategy is Moment, a company known for selling high-quality lenses for smartphone cameras and other photography accessories.

Moment offers an amazing series of online courses and tutorials called "Moment Lessons," tailored to the specific products purchased by their customers.

These lessons cover everything from basic photography skills to advanced techniques specific to using Moment's lenses.

After a purchase, customers receive targeted emails linking to tutorials and courses to help them maximize their new lens. Moment also runs photo challenges that encourage users to practice new skills and share their photos, fostering a sense of community. Additionally,

Moment actively solicits feedback on their courses to create new content that addresses common questions or difficulties.

These initiatives have yielded significant results:

• Increased Customer Engagement: Customers engaged with the tutorials and lessons show higher satisfaction rates and are more active in the community.
• Higher Conversion Rates: Moment has observed that customers who engage with their personalized educational content are more likely to make additional purchases, such as buying new lenses or accessories featured in the lessons.
• Customer Retention: Offering ongoing educational content helps keep the brand top-of-mind for customers, leading to higher retention rates and repeat purchases.

Moment’s personalized educational roadmap illustrates how tailored learning resources can enhance customer satisfaction, engagement, and lifetime value. By guiding customers to realize the full potential of their purchases, Moment not only adds value but also creates a pathway for future sales.

Conducting A/B Testing

Companies can utilize A/B testing to increase CLV by focusing on the long-term aspects of customer interaction.

This includes testing different customer service strategies, subscription models, loyalty program features, and personalized marketing messages.

Online, you can easily build out A/B tests in your post purchase email flows, but it's not too hard to set up in all sorts of situations.

Take a pest control company for example. After an initial service, the pest control technician can test an offer to find the best converting way to get customers to commit to a longer term contract, which we will do in groups:

You have your technicians make these offers over the course of 3 months to find which will convert at the highest rate. 

You collect the date, crunch the numbers, and find:

The Group B 15% discount offer is the clear winner with a 30% conversion rate. 

You could just take that 30% conversion as a win and run with it, BUT. Here is why testing is so important.

What if you looked at all three offers and also tracked the Customer Lifetime Value and churn rate:

While Group B clearly looked like the winner from a pure conversion rate perspective, Group C's combined pest and termite offer showed to have the best customer lifetime value over time with clients sticking around longer.

By understanding what keeps customers engaged over time, companies can refine their strategies to enhance customer satisfaction and loyalty.

Behavioral Segmentation

Companies can utilize behavioral segmentation to increase CLV by observing and categorizing customers based on their interactions and responses to products or services.

For example, a you may use behavioral segmentation data to determine a specific segment of customers are likely to be interested in a premium subscription service and target them with special offers. Or, analyzing purchasing patterns can help you create personalized product bundles. A fitness app could segment users based on workout frequency and suggest personalized fitness plans.

Companies can utilize behavioral segmentation to enhance customer retention strategies by identifying valuable customers segments and tailoring experiences to them.

Chewy, an online retailer of pet food and products, leverages CLV data to foster strong customer loyalty and drive growth.

These initiatives have shown to be very profitable to Chewy.com's bottom line.

Chewy’s personalized approach has significantly boosted customer retention, with repeat customers accounting for over 70% of their net sales.

Chewy's high-CLV customers tend to spend significantly more, with average order values increasing by approximately 15% due to targeted upselling and cross-selling.

The personalized service and targeted promotions have led to high levels of customer satisfaction and loyalty, contributing to an NPS score almost double that of some very heavy hitters in their niche - Petsmart, Amazon, and Petco.

You can take this a step further by combining this strategy with our Whale Strategy above. By tailoring your offering with behavioral segmentation you may be able to find or even create new "Whale Segments" that will dramatically increase customer lifetime value.

Dynamic Pricing Strategies

Dynamic pricing strategies, when aligned with customer behavior and market trends, can significantly increase customer lifetime value (CLV).

Dynamic pricing solves a very difficult supply / demand equation. It is an interesting concept for SMB's, but difficult to manage because of the tech required to implement it.

For example, airlines use dynamic pricing based on demand, time of booking, and seat availability, rewarding early bookings with lower prices. 

Ride-sharing services adjust prices in real-time based on traffic and demand, which can attract customers during off-peak times with lower rates and attract more drivers in peak times at higher rates to ensure customers always have a ride.

Uber, a global leader in the ride-sharing industry, is a well-known utilizer of  dynamic pricing strategies (more commonly known as surge pricing in the ride-sharing world) to manage supply and demand, ensuring availability while maximizing profitability.

Uber has implemented:

1. Real-Time Pricing Adjustments: Uber’s pricing algorithm automatically adjusts fares in real-time based on several factors, including current demand for rides, the number of available drivers, and local events that might affect traffic and ride requests.
2. User Notification: Uber informs users about price surges through its app before they book a ride. This transparency helps manage customer expectations and reduces dissatisfaction related to unexpected costs.
3. Incentives for Drivers: During periods of high demand, Uber offers higher pay to drivers who are willing to work in busy areas, ensuring that customer needs are met promptly.

And while Uber's riders may complain about the riser in price during surge times, Uber has come up with the best solution to ensure drivers are incentivized to drive at these peak times by paying them more when they are needed most, leading to:

• Increased Driver Availability: By incentivizing drivers to operate in high-demand areas, Uber ensures that it can meet customer demand, even during peak times.
• Enhanced Customer Satisfaction: Customers can choose to ride at peak times knowing the price in advance or wait until prices normalize. This flexibility increases overall satisfaction as customers feel in control of their spending.
• Optimized Revenue: Dynamic pricing allows Uber to maximize revenue during high-demand periods, which contributes significantly to the company’s overall financial health.

Uber’s use of dynamic pricing strategies effectively aligns customer and driver behavior with market trends, optimizing satisfaction and profitability. This approach not only enhances the customer experience by providing options and transparency but also ensures that Uber can adapt quickly to changes in demand and supply.

While mostly used in tech, think about how your business could implement this technique in your business, and you might be surprised at what solutions you come up with.

Know Your KPI's

Companies can identify meaningful KPIs by analyzing which metrics align closely with their business goals and customer lifecycle.

For example:

Key Performance Indicators (KPIs) most relevant to increasing CLV include:

To maximize CLV, companies can track these KPIs over time, test strategies for improvement, and observe the impact. For instance, if a company notices a high customer acquisition cost, they may invest in retention strategies to improve CLV, such as enhancing customer service or creating loyalty programs.

Monitoring these KPIs helps businesses understand customer behavior and develop strategies to enhance CLV, like personalized marketing or loyalty programs.

Optimize Your Churn Rate

One thing about SAAS companies that completely fascinates me is

1. The ability to utilize massive amounts of data to make decisions and implement change at scale. 
2. To learn faster by either failing or succeeding quickly.

By understanding where clients are dropping out, you are able to implement specific strategies that focus on customer satisfaction, engagement, and retention.

And is SAAS businesses, that solution can be implemented with a bit of code, launched, and reach ALL of their customers with immediate impact.

By studying these businesses you can learn dozens of techniques that can be implemented in any type of business.

The fact is - the longer you keep a customer in your ecosystem, the more money you will make. Nothing kills CLV like churn.

Here are a few things to remember:

1. Offer top notch customer service to address issues quickly.
2. Understand the sticking points in your onboarding, execution, and post sale processes and constantly work to reduce friction and improve.
3. Regularly improve products and services based on customer feedback.
4. Create a community around the brand for customers to connect and engage.

By enhancing the overall customer experience, companies can make customers feel valued and less likely to leave, thereby reducing churn rate and increasing CLV. For example, a subscription service could introduce a tiered rewards system that offers greater benefits the longer a customer stays subscribed, thus encouraging continued loyalty.